<PAGE>
As filed with the Securities and Exchange Commission on June 1, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
[_]
File No. 333-74835
Pre-Effective Amendment No. 1
--- [X]
Post-Effective Amendment No.
--- [_]
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
[_]
File No. 811-09267
Amendment No. 1
--- [X]
Nuveen Money Market Trust
(Exact Name of Registrant as Specified in Charter)
333 West Wacker Drive, Chicago, 60606
Illinois (Zip Code)
(Address of Principal Executive
Offices)
Registrant's Telephone Number, Including Area Code: (312) 917-7700
Gifford R. Zimmerman, Esq.--Vice With a copy to: Thomas S. Harman,
President and Secretary Esq. Morgan, Lewis & Bockius LLP
333 West Wacker Drive 1800 M Street, N.W. Washington, DC
Chicago, Illinois 60606 20036
(Name and Address of Agent for Service)
Title of Securities Being Registered ... Units of Beneficial Interest
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[X] Approximate date of Proposed Public Offering:
As soon as practicable after the
effective date of this Registration Statement
- --------------------------------------------------------------------------------
Registrant hereby amends this Registration Statement on such date or dates as
may be necessary to delay its effective date until the Registrant shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the Secu-
rities Act of 1933 or until the Registration Statement shall become effective
on such date as the Commission acting pursuant to said Section 8(a) may deter-
mine.
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- --------------------------------------------------------------------------------
<PAGE>
June 10, 1999 Prospectus
Nuveen
Mutual Funds
Nuveen Institutional Tax-Exempt
Money Market Fund
For investors
seeking
attractive tax-free
income
and
stability
of principal.
Featuring Portfolio Management By Nuveen Investment Advisory Services
A Premier Adviser/SM/ for Income Investing
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation to
the contrary is a criminal offense.
<PAGE>
Table of Contents
Section 1 The Fund
This section provides you with an overview of the fund including investment
objectives, portfolio holdings and historical performance information.
Introduction 1
................................................................................
Nuveen Institutional Tax-Exempt Money Market Fund 2
................................................................................
Section 2 How We Manage Your Money
This section gives you a detailed discussion of our investment and risk
management strategies.
Who Manages the Fund 4
................................................................................
What Securities We Invest In 5
................................................................................
How We Select Investments 6
................................................................................
How We Manage Risk 6
................................................................................
Section 3 How You Can Buy and Sell Shares
This section provides the information you need to move money into and out of
your account.
How to Buy Shares 8
................................................................................
Special Services 8
................................................................................
How to Sell Shares 9
................................................................................
Section 4 General Information
This section summarizes the fund's distribution policies and other general
information.
Dividends, Distributions and Taxes 10
................................................................................
Taxes and Tax Reporting 10
................................................................................
Net Asset Value 11
................................................................................
Fund Service Providers 12
................................................................................
Year 2000 12
................................................................................
Section 5 Financial Highlights
This section provides the fund's financial performance for the
past five years. 13
We have used the icons below throughout this prospectus to make it easy for you
to find the type of information you need.
Investment
Strategy
Risks
Fees, Charges
and Expenses
Shareholder
Instructions
Performance and
Current Portfolio
Information
<PAGE>
June 10, 1999
Section 1 The Fund
Nuveen Institutional Tax-Exempt Money Market Fund
Introduction
This prospectus is intended to provide important information to help you
evaluate whether the Nuveen Institutional Tax-Exempt Money Market Fund may be
right for you. Please read it carefully before investing and keep it for future
reference.
Regular Income, Convenience and Stability of Principal
Tax-free money market funds offer you the opportunity to earn tax-free income on
your cash reserves while also providing easy access to your money and stability
of principal. They can provide a convenient way to make gradual transfers into
stock or bond funds, or to lower the overall risk of your portfolio.
The fund invests in high quality municipal money market securities that its
investment adviser believes present minimal credit risks. The fund's investment
policies are designed to mitigate overall risk and maintain a constant price per
share of $1.00, but there can be no guarantee of this.
NOT FDIC OR GOVERNMENT INSURED MAY LOSE VALUE NO BANK GUARANTEE
Section 1 The Fund 1
<PAGE>
Nuveen Institutional Tax-Exempt
Money Market Fund
Fund Overview
Investment Objective
The fund's investment objective is to provide as high a level of current income
exempt from federal income taxes as is consistent with the stability of
principal and the maintenance of liquidity.
How the Fund Pursues Its Objective
The fund invests substantially all of its assets in a diversified portfolio of
high quality, tax-exempt money market instruments that the fund's investment
adviser believes present minimal credit risks. The adviser selects money market
instruments based on its assessment of current market interest rates and its
market outlook. The adviser seeks to identify money market instruments with
favorable characteristics the adviser believes are not yet recognized by the
market.
What are the Risks of Investing in the Fund?
While the fund invests in securities its investment adviser believes present
minimal credit and interest rate risks, the fund is not risk free. The value of
the fund's investments may be adversely affected by changes in prevailing
interest rates or an issuer's credit quality. The fund's investment policies
are designed to mitigate these risks and maintain a constant price per share of
$1.00, but there can be no guarantee of this. Like any mutual fund investment,
loss of money is a risk of investing.
Is This Fund Right for You?
The fund may be appropriate for you if you are an institutional investor and
seek to:
. Invest short-term funds in a tax-exempt investment;
. Earn monthly tax-free income on your cash reserves with check-writing
privileges;
. Maintain stability of principal; or
. Make gradual transfers into stock or bond funds.
You should not invest in this fund if you seek to pursue long-term growth of
principal.
How the Fund Has Performed
The chart and table below illustrate annual fund returns for each of the past
ten years as well as annualized fund and index returns for the one-, five-year,
ten-year and since inception periods ended December 31, 1998. This information
is intended to help you assess the variability of fund returns over the past ten
years (and consequently, the potential rewards and risks of a fund investment).
Past performance is not necessarily an indication of future performance.
Total Returns
[Bar chart appears here]
Annual Returns*
1989 6.27%
1990 5.87%
1991 4.31%
1992 2.80%
1993 2.09%
1994 2.49%
1995 3.51%
1996 3.17%
1997 3.31%
1998 3.20%
*The year-to-date return as of March 31, 1999 was .65%.
During the last ten years ended December 31, 1998, the highest and lowest
quarterly returns were 1.63% and .47%, respectively, for the quarters ended June
30, 1989 and March 31, 1994.
<TABLE>
<CAPTION>
Average Annual Total Returns for
the Periods Ended December 31, 1998
.......................................
1 Year 5 Year 10 Year
---------------------------------------
<S> <C> <C> <C>
Nuveen Institutional
Tax-Exempt Money Market Fund 3.20% 3.14% 3.71%
Lipper Index /1/ 3.24% 3.20% 3.72%
</TABLE>
Based on the seven-day period ended December 31, 1998, the fund's yield was
3.34%, and the taxable equivalent yield (using maximum federal income tax rate
of 39.6%) was 5.53%. For the fund's current yields, please call Nuveen at (800)
257-8787.
2 Section 1 The Fund
<PAGE>
What are the Costs of Investing?
This table describes the fees and
expenses that you may pay if you
buy and hold shares of the fund.
Shareholder Transaction Expenses
Paid Directly From Your Investment
Maximum Sales Charge Imposed
on Purchases None
.........................................
Maximum Sales Charge Imposed
on Reinvested Dividends None
.........................................
Exchange Fees None
.........................................
Annual Fund Operating Expenses
Paid From Fund Assets
Management Fees .38%
.........................................
12b-1 Distribution and Service Fees None
.........................................
Other Expenses .05%
.........................................
Total Operating Expenses .43%
.........................................
Example
The following example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. The example assumes
you invest $10,000 in the fund for the time periods indicated, and then redeem
all your shares at the end of a period. The example also assumes that your
investment has a 5% return each year and that the fund's operating expenses
remain the same. Your actual returns and costs may be higher or lower.
<TABLE>
<S> <C>
1 Year $ 44
3 Years $138
5 Years $241
10 Years $542
</TABLE>
How the Fund Is Invested (as of 05/31/99)
Portfolio Statistics
Weighted Average Maturity (Days) 43
.........................................
Credit Quality
Industry Diversification (Top 5)
Tax Obligation/General 15%
.........................................
Long-Term Care 15%
.........................................
Healthcare 14%
.........................................
Tax Obligation/Limited 14%
.........................................
Utilities 10%
.........................................
1. Lipper Index returns reflect the performance of funds in the Lipper
Institutional Tax-Exempt Money Market Index Returns assume reinvestment of
dividends and do not reflect any applicable sales charge.
Section 1 The Fund 3
<PAGE>
Section 2 How We Manage Your Money
To help you understand how the fund's assets are managed, this section includes
a detailed discussion of the adviser's investment and risk management
strategies. For a more complete discussion of these matters, please consult the
Statement of Additional Information.
Who Manages the Fund
Nuveen Investment Advisory Services provides advisory and investment management
services to a broad range of clients. Nuveen Investment Advisory Services is
comprised of Nuveen Advisory Corp. and Nuveen Institutional Advisory Corp., both
of which are wholly-owned subsidiaries of John Nuveen & Co. Incorporated
(Nuveen). Nuveen Advisory Corp. (Nuveen Advisory) is the fund's investment
adviser and as such is responsible for the selection and on-going monitoring of
the securities in the fund's portfolio, managing the fund's business affairs and
providing certain clerical, bookkeeping and other administrative services.
Nuveen Advisory is located at 333 West Wacker Drive, Chicago, IL 60606. For
providing these services, Nuveen Advisory is paid an annual management fee. For
the most recent fiscal year, the fund, as its predecessor, paid .40% of its
average net assets to Nuveen Advisory for its services.
Founded in 1898, Nuveen has been synonymous with investments that withstand the
test of time. Today, we offer a broad range of quality investments designed for
individuals seeking to build and maintain wealth. Nuveen is the sponsor and
principal underwriter of the fund's shares and has sponsored or underwritten
more than $60 billion of investment company securities. Nuveen and its
affiliates have approximately $50 billion in assets under management.
4 Section 2 How We Manage Your Money
<PAGE>
What Securities We Invest In
Tax-Exempt Money Market Securities
The Fund invests in high quality, short-term tax exempt debt securities,
commonly known as municipal money market securities. Municipal money market
securities pay income which is exempt from regular federal income tax but may be
subject to the federal alternative minimum tax.
States and local governments, municipalities, agencies and other governmental
units issue municipal money market securities to raise money for various public
purposes, such as building public facilities, refinancing outstanding debt and
financing general operating expenses. These securities include general
obligation bonds, which are backed by the full faith and credit of the issuer
and may be repaid from any revenue source, and revenue bonds, which may be
repaid only from the revenue of a specific facility or source. Tax-exempt
instruments also include notes, such as bond anticipation, revenue anticipation,
construction loan and bank notes, and commercial paper.
Credit-Enhanced Investments
Some of the fund's investments may be backed by a letter of credit or other type
of credit enhancement. For example, if an issuer does not have the desired
credit rating, another company may use its higher credit rating to back the
issuer's rating by selling the issuer a letter of credit. Investments backed by
a letter of credit are subject to the risk that the company issuing the letter
of credit will not be able to fulfill its obligation to the fund, or is thought
to be unlikely to be able to do so. This could cause losses to the fund and
affect its share price.
Variable Rate and Floating Rate Demand Notes
We expect variable rate and floating rate securities will comprise a large
portion of the fund's portfolio. These investments may have stated maturities of
more than 397 days, but generally allow the holder to receive payment of
principal plus accrued interest much sooner than this. Because their interest
rates are not fixed, the income earned by the fund on these securities generally
will fluctuate with changes in short-term interest rates.
When-Issued and Delayed Delivery Transactions
The fund may buy or sell securities on a when-issued or delayed delivery basis,
paying for or taking delivery of the securities at a later date, normally within
15-45 days of the trade. These transactions involve an element of risk because
the value of the security to be purchased may decline before the settlement
date.
Temporary Strategies
The fund on a temporary basis may invest in taxable money market securities.
Taxable money market securities include U.S. government securities, quality
commercial paper or similar fixed-income securities with remaining maturities of
one year or less. The fund will only do so under extraordinary circumstances or
unusual market conditions. Under these circumstances, the fund will not be
pursuing its investment objective.
How We Select Investments
Nuveen Advisory selects money market instruments based on its assessment of
current market interest rates and its market outlook. Portfolio managers are
supported by a team of specialized research analysts who review securities
available for purchase, monitor the continued creditworthiness of the fund's
investments, and analyze
Section 2 How We Manage Your Money 5
<PAGE>
economic, political and demographic trends affecting the municipal money market.
We seek to identify money market instruments with favorable characteristics we
believe are not yet recognized by the market. We then select those higher-
yielding and undervalued money market instruments that we believe represent the
most attractive values without adding undue risk. We actively manage the
maturity of the fund and its portfolio to optimally balance the fund's yield
with the fund's exposure to interest rate risk.
How We Manage Risk
Risk is inherent in all investing. Investing in a mutual fund -- even a money
market fund -- involves risk, including the risk that you may receive little or
no return on your investment or even that you may lose part or all of your
investment. In pursuing its investment objective, the fund assumes investment
risk, chiefly in the form of interest rate and credit risk. The fund tries to
limit risk by restricting the types and maturities of the money market
instruments it purchases, and by diversifying its investment portfolio among
issuers and across different industries. Therefore, before investing, you should
consider carefully the following risks that you assume when you invest in the
fund.
Interest rate risk: Because the fund invests in fixed-income securities, the
fund is subject to interest rate risk. Interest rate risk is the risk that the
value of the fund's portfolio will decline because of rising interest rates.
Interest rate risk is generally lower for shorter-term investments and higher
for longer-term investments.
To mitigate interest rate risk, the fund, under normal market conditions,
maintains an investment portfolio with an overall weighted average maturity of
90 days or less. In addition, the fund limits its investments to money market
instruments with remaining effective maturities of 397 days or less.
Credit risk: The fund is subject to credit risk. Credit risk is the risk that an
issuer of a money market instrument will be unable to meet its obligation to
make interest and principal payments due to changing financial or market
conditions, or possibly due to Year 2000 issues. (See below)
An Important Note About Risk
Although the fund's investment policies are intended to minimize interest rate
and credit risk, there can be no guarantee of this.
The fund attempts to mitigate credit risk by investing only in high quality
money market instruments that Nuveen Advisory believes present minimal credit
risks at the time of purchase. High quality instruments are:
. rated in one of the two highest short-term rating categories by at least two
nationally recognized rating services, or
. if only one service has rated the instrument, rated by that service in one of
its two highest short-term rating categories, or
. unrated instruments that Nuveen Advisory judges to be of comparable quality.
6 Section 2 How We Manage Your Money
<PAGE>
In addition, the fund will not invest more than 5% of its total assets in money
market instruments rated in the second highest short-term rating categories or
in their unrated equivalents.
Year 2000 issues may affect the ability of municipal issuers to meet their
interest and principal payment obligations to their bond holders, and may
adversely affect the bonds' credit ratings and values. Municipal issuers may
have greater Year 2000 risks than other issuers. Nuveen Advisory is requesting
information from municipal issuers so that Nuveen Advisory can take the issuers'
Year 2000 readiness, if made available, into account in making investment
decisions. There can be no assurance that issuers will provide this information
to Nuveen Advisory, or that issuers will begin or complete the work necessary to
address any Year 2000 issues on a timely basis. Generally, higher rated fixed-
income securities carry less credit risk than lower rated fixed-income
securities.
Concentration risk: Concentration risk is the risk that economic or other
developments affecting a single industry may cause the value of related money
market instruments to decline.
To mitigate concentration risk, the fund will not invest more than 25% of its
assets in any one industry, excluding governmental issuers. The fund may,
however, invest more than 25% of its assets in a broad segment of the tax-exempt
market, such as instruments issued to fund hospitals, housing or airports, if
Nuveen Advisory believes that the potential returns justify any additional risks
that may arise from doing so. These policies on concentration risk may not be
changed without shareholder approval.
The fund may invest without limit in securities backed by letters of credit or
other credit enhancements issued by banks and other financial institutions. As
a result, changes in the banking industry may cause the value of securities
backed by such credit enhancements to decline.
Insurance: The fund has purchased liability insurance against a decline in the
value of the fund's portfolio caused by the default or bankruptcy of an issuer
whose securities are owned by the fund. The insurance covers substantially all
of the fund's investments except U.S. government securities. The maximum total
coverage for all Nuveen money market funds is $50 million, with a deductible for
each loss of 0.10% of the fund's net assets. The fund pays the policy's
premiums. Coverage under the policy is subject to certain conditions and may not
be renewable upon expiration. While the policy is intended to provide some
protection against credit risk and to help the fund maintain a constant price
per share of $1.00, there is no guarantee that the insurance will do so.
Section 2 How We Manage Your Money 7
<PAGE>
Section 3 How You Can Buy and Sell Shares
We offer a number of services for your convenience. Please see the Statement of
Additional Information for further details.
How to Buy Shares
Fund shares may be purchased at net asset value on any business day, which is
any day the Federal Reserve Bank of Boston is normally open for business.
Generally, the bank is closed on weekends and national holidays. The fund's net
asset value is determined at 12:00 noon Eastern Time on each business day, and
on other days where there is significant trading activity in the fund's shares.
If the fund receives your order in proper form before 12:00 noon and the fund's
custodian receives federal funds from you before 3:00 p.m., Eastern Time, you
will receive the dividend declared and net asset value computed on that day.
Otherwise, you will receive the next business day's dividend and net asset
value.
By Mail
You may open an account and buy shares through the mail by completing the
enclosed application and mailing it along with your check to the fund, c/o
Nuveen Investor Services, P.O. Box 5186, Bowling Green Station, New York, NY
10274-5186.
Minimum Investments
The minimum initial investment is $25,000. Subsequent investments for your
account must be in amounts of $500 or more.The fund reserves the right to reject
purchase orders and to waive or increase the minimum investment requirements.
Special Services
To help make your investing with us easy and efficient, we offer you the
following services at no extra cost.
Exchanging Shares
You may exchange fund shares into an identically registered account at any time
for the appropriate class of another Nuveen mutual fund available in your state.
Your exchange must meet the minimum purchase requirements of the fund into which
you are exchanging. You may have to pay a sales charge when exchanging shares
that you purchased without a sales charge for shares that are sold with a sales
charge. Please consult the Statement of Additional Information for details.
The fund may change or cancel its exchange policy at any time on 60 days'
notice. Because an exchange is treated for tax purposes as a purchase and sale,
and any gain may be subject to tax, you should consult your tax adviser about
the tax consequences of exchanging your shares.
8 Section 3 How You Can Buy and Sell Shares
<PAGE>
How to Sell Shares
You may sell (redeem) your shares on any business day. You will receive the
share price next determined after the fund has received your properly completed
redemption request. If you are selling shares purchased recently with a check,
you will not receive your redemption proceeds until your check has cleared. This
may take up to ten days from your purchase date.
By Telephone
If you have authorized telephone redemption privileges, you can redeem your
shares by calling (800) 257-8787. Telephone redemptions are not available if you
own shares in certificate form and may not exceed $50,000. Checks will only be
issued to you as the shareholder of record and mailed to your address of record.
We will normally mail your check the next business day.
An Important Note About Telephone Transactions
Although Nuveen Investor Services has certain safeguards and procedures to
confirm the identity of callers, it will not be liable for losses resulting from
following telephone instructions it reasonably believes to be genuine. Also, you
should verify your trade confirmations immediately upon receipt.
By Mail
You can sell your shares at any time by sending a written request to the fund,
c/o Nuveen Investor Services, P.O. Box 5186, Bowling Green Station, New York, NY
10274-5186. Your redemption request must include the following information:
. The fund's name;
. Your name and account number;
. The dollar or share amount you wish to redeem;
. The signature of each owner exactly as it appears on the account;
. The name of the person to whom you want your redemption proceeds paid (if
other than to the shareholder of record);
. The address where you want your redemption proceeds sent (if other than the
address of record); and
. Any required signature guarantees (see below).
The fund will normally mail your check the next business day after it receives
your redemption request, but in no event more than seven days after the fund
receives your request. If you purchased your shares by check, your redemption
proceeds will not be mailed until your check has cleared. This may take up to
ten days from your purchase date.
Signature Guarantees
Signature guarantees are required if you are redeeming more than $50,000, you
want the check payable to someone other than the shareholder of record, you want
the check sent to another address, or if the address on the fund's records has
been changed within the last 60 days. Signature guarantees must be obtained from
a bank, brokerage firm or other financial intermediary that is a member of an
approved Medallion Guarantee Program or that is otherwise approved by the fund.
A notary public cannot provide a signature guarantee.
An important Note About Involuntary Redemption
From time to time, the fund may establish minimum account size requirements. The
fund reserves the right to liquidate your account upon 60 days' written notice
if the value of your account falls below an established minimum. The fund has
set a minimum account balance of $5,000.
Redemptions In-Kind
The fund generally pays redemption proceeds in cash. Under unusual conditions
that make cash payment unwise and for the protection of existing shareholders,
the fund may pay all or a portion of your redemption proceeds in securities of
other fund assets. Although it is unlikely that your shares would be redeemed
in-kind, you would probably have to pay brokerage costs to sell the securities
distributed to you, as well as taxes on any capital gains from that sale.
Section 3 How You Can Buy and Sell Shares 9
<PAGE>
Section 4 General Information
To help you understand the tax implications of investing in the fund, this
section includes important details about how the fund makes distributions to
shareholders. We discuss some other fund policies as well.
Dividends, Distributions and Taxes
The fund pays tax-free dividends monthly. In the very unlikely event that the
fund realizes capital gains or taxable income subject to regular federal income
tax, it will pay any capital gains or other distributions annually. The fund
declares dividends on each business day to shareholders of record on that day.
Payment and Reinvestment Options
The fund automatically reinvests your dividends in additional fund shares unless
you request otherwise. You may request to have your dividends paid to you by
check, deposited directly into your bank account, paid to a third party, sent to
an address other than the address on the fund's records, or reinvested in shares
of another Nuveen mutual fund. For more information, contact your financial
adviser or call Nuveen at (800) 257-8787.
Taxes and Tax Reporting
Because the fund invests in municipal money market securities, your regular
monthly dividends will be exempt from regular federal income tax. A portion of
these dividends, however, may be subject to state and local taxes or the federal
alternative minimum tax.
Although very unlikely, the fund may, from time to time, distribute taxable
ordinary income or capital gains. Capital gains are taxable to shareholders
either as ordinary income or as long-term capital gains, depending on how long
the fund owned the investment.
Early in each year, you will receive a statement detailing the amount and nature
of all dividends and capital gains that you were paid during the prior year. If
you hold your investment at the firm where you purchased your fund shares, you
will receive the statement from that firm. If you hold your shares directly at
the fund, Nuveen will send you the statement. The tax status of your dividends
is the same whether you reinvest your dividends or elect to receive them in
cash.
If you receive social security or railroad retirement benefits, you should
consult your tax adviser about how an investment in the fund may affect the
federal taxation of your benefits.
10 Section 4 General Information
<PAGE>
Please note that if you do not furnish the fund with your correct Social
Security number or employer identification number, federal law requires the fund
to withhold federal income tax from your distributions and redemption proceeds,
currently at a rate of 31%.
Please consult the Statement of Additional Information and your tax advisor for
more information about taxes.
Taxable Equivalent Yields
The taxable equivalent yield is the current yield you would need to earn on a
taxable investment in order to equal a stated tax-free yield on a municipal
investment. To assist you to more easily compare municipal investments like the
funds with taxable alternative investments, the table below presents the taxable
equivalent yields for a range of hypothetical tax-free yields and tax rates.
Taxable Equivalent Yield
- --------------------------------------------------------------------------------
Tax-Exempt Yields
Federal Tax Rates 2.00% 2.50% 3.00% 3.50% 4.00%
...............................................................................
28.0% 2.78% 3.47% 4.17% 4.86% 5.56%
...............................................................................
31.0% 2.90% 3.62% 4.35% 5.07% 5.80%
...............................................................................
36.0% 3.13% 3.91% 4.69% 5.47% 6.25%
...............................................................................
39.6% 3.31% 4.14% 4.97% 5.79% 6.62%
...............................................................................
The yields and tax rates shown above are hypothetical and do not predict your
actual returns or effective tax rate. For more detailed information, see the
Statement of Additional Information or consult your tax adviser.
Net Asset Value
The price you pay and receive for your shares is based on the fund's net asset
value per share, which is determined at 12:00 noon Eastern Time on each business
day. Because the fund seeks to maintain a constant price per share of $1.00, the
fund values its portfolio securities using the amortized cost method, which
approximates market value and is described in more detail in the Statement of
Additional Information. There can be no assurance that the fund will be able to
maintain a constant price per share of $1.00.
Section 4 General Information 11
<PAGE>
Fund Service Providers
The custodian of the fund's assets is The Chase Manhattan Bank, 4 New York
Plaza, New York, NY 10004-2413. Chase also provides certain accounting services
to the fund. The fund's transfer, shareholder services and dividend paying
agent, Chase Global Funds Services Company, P.O. Box 5186, New York, NY 10274-
5186, performs bookkeeping, data processing and administrative services for the
maintenance of shareholder accounts.
Year 2000
The fund's service providers rely on computer systems to manage the fund's
investments, process shareholder transactions and provide shareholder account
maintenance. Because of the way computers historically have stored dates, some
of these systems currently may not be able to correctly process activity
occurring in the year 2000. Nuveen is working with the fund's service providers
to adapt their systems to address this issue. Nuveen and the fund expect that
the necessary work will be completed on a timely basis, although there can be no
assurance of this.
12 Section 4 General Information
<PAGE>
Section 5 Financial Highlights
13 Section 5 Financial Highlights
<PAGE>
Nuveen Mutual Funds
Nuveen offers a variety of mutual funds designed to help you reach your
financial goals. The funds below are grouped by investment objectives.
Growth
Nuveen Rittenhouse Growth Fund
Growth and Income
Growth and Income Stock Fund
Balanced Stock and Bond Fund
Balanced Municipal and Stock Fund
Dividend and Growth Fund
European Value Fund
Income
Income Fund
Tax-Free Income
National Municipal Bond Funds
Long-term
Insured Long-term
Intermediate-term
Limited-term
State Municipal Bond Funds
Arizona Louisiana North Carolina
California/1/ Maryland Ohio
Colorado Massachusetts/1/ Pennsylvania
Connecticut Michigan Tennessee
Florida Missouri Virginia
Georgia New Jersey Wisconsin
Kansas New Mexico
Kentucky New York/1/
Cash Reserves
Money Market Fund
Municipal Money Market Fund
California Tax-Exempt Money Market Fund
New York Tax-Exempt Money Market Fund
Several additional sources of information are available to you. The Statement of
Additional Information, incorporated by reference into this prospectus, contains
detailed information on fund policies and operations. Shareholder reports
contain management's discussion of market conditions, investment strategies and
performance results as of the fund's latest semi-annual or annual fiscal year
end. Call Nuveen at (800) 257-8787 to request a free copy of any of these
materials or other fund information, or ask your financial adviser for copies.
You also may 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 (800) SEC-0330
for room hours and operation. You also may request fund information by writing
to the SEC's Public Reference Section, Washington, D.C. 20549. The fund's
Investment Company Act file number is 811-09267.
1. Long-term and insured long-term portfolios.
MMPR-MM 6-99
NUVEEN
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
(800) 257-8787
www.nuveen.com
<PAGE>
June 10, 1999 Prospectus
NUVEEN
Mutual Funds
Nuveen Municipal Money Market Fund
For investors
seeking
attractive
tax-free income
and stability of
principal.
Featuring Portfolio Management By Nuveen Investment Advisory Services
A Premier Adviser/SM/ for Income Investing
- -----------------------------------------------------
The Securities and Exchange Commission has not
approved or disapproved these securities or passed
upon the adequacy of this prospectus. Any
representation to the contrary is a criminal offense.
- -----------------------------------------------------
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
<S> <C>
Section 1 The Fund
This section provides you with an overview of the fund including investment
objectives, portfolio holdings and historical performance information.
Introduction 1
Nuveen Municipal Money Market Fund 2
Section 2 How We Manage Your Money
This section gives you a detailed discussion of our investment and risk
management strategies.
Who Manages the Fund 4
What Securities We Invest In 4
How We Select Investments 5
How We Manage Risk 6
Section 3 How You Can Buy and Sell Shares
This section provides the information you need to move money into and out of
your account.
How to Buy Shares 8
Systematic Investing 9
Special Services 9
How to Sell Shares 10
Section 4 General Information
This section summarizes the fund's distribution policies and other general
information.
Dividends, Distributions and Taxes 12
Taxes and Tax Reporting 12
Service Plan 13
Net Asset Value 14
Fund Service Providers 14
Year 2000 14
Section 5 Financial Highlights
This section provides the fund's financial performance
for the past five years. 16
</TABLE>
We have used the icons below throughout this prospectus to make it easy for you
to find the type of information you need.
Investment
Strategy
Risks
Fees, Charges
and Expenses
Shareholder
Instructions
Performance and
Current Portfolio
Information
<PAGE>
June 10, 1999
Section 1 The Fund
Nuveen Municipal Money Market Fund
Introduction
This prospectus is intended to provide important information
to help you evaluate whether the Nuveen Municipal Money
Market Fund may be right for you. Please read it carefully
before investing and keep it for future reference.
Regular Income, Convenience and Stability of Principal
Tax-free money market funds offer you the opportunity to earn
tax-free income on your cash reserves while also providing
easy access to your money and stability of principal. They
can provide a convenient way to make gradual transfers into
stock or bond funds, or to lower the overall risk of your
portfolio.
The fund invests in high quality municipal money market
securities that its investment adviser believes present
minimal credit risks. The fund's investment policies are
designed to mitigate overall risk and maintain a constant
price per share of $1.00, but there can be no guarantee of
this.
-------------------------------------------------------------------
NOT FDIC OR GOVERNMENT INSURED MAY LOSE VALUE NO BANK GUARANTEE
-------------------------------------------------------------------
Section 1 The Fund 1
<PAGE>
Nuveen Municipal Money Market Fund
Fund Overview
Investment Objective
The fund's investment objective is to provide as high a level of current income
exempt from regular federal income taxes as is consistent with the stability of
principal and the maintenance of liquidity.
How the Fund Pursues Its Objective
The fund invests substantially all of its assets in a diversified portfolio of
high quality municipal money market instruments that the fund's investment
adviser believes present minimal credit risks. The adviser selects money market
instruments based on its assessment of current market interest rates and its
market outlook. The adviser seeks to identify money market instruments with
favorable characteristics the adviser believes are not yet recognized by the
market.
What are the Risks of Investing in the Fund?
While the fund invests in securities its investment adviser believes present
minimal credit and interest rate risks, the fund is not risk free. The value of
the fund's investments may be adversely affected by changes in prevailing
interest rates or an issuer's credit quality. The fund's investment policies are
designed to mitigate these risks and maintain a constant price per share of
$1.00, but there can be no guarantee of this. Like any mutual fund investment,
loss of money is a risk of investing.
Is This Fund Right for You?
The fund may be appropriate for you if you seek to:
. Earn monthly tax-free income on your cash reserves with check-writing
privileges;
. Maintain stability of principal;
. Make gradual transfers into stock or bond funds; or
. Lower the overall risk of your investment portfolio.
You should not invest in this fund if you seek to pursue long-term growth of
principal. You may not want to invest in this fund if you are subject to federal
alternative minimum tax.
How the Fund Has Performed
The chart and table below illustrate annual fund returns for each of the past
ten years as well as annualized fund and index returns for the one-, five-year,
ten-year and since inception periods ended December 31, 1998. This information
is intended to help you assess the variability of fund returns over the past ten
years (and consequently, the potential rewards and risks of a fund investment).
Of course past performance is not necessarily an indication of future
performance.
Total Returns
Annual Returns*
7% 1989 5.96%
6% 1990 5.57%
5% 1991 4.23% [BAR CHART APPEARS HERE]
4% 1992 2.55%
3% 1993 1.88%
2% 1994 2.27%
1% 1995 3.32%
0% 1996 2.92%
1997 3.06%
1998 2.96%
/*/The year-to-date return as of March 31, 1999 was .61%.
During the last ten years ended December 31, 1998, the highest and lowest
quarterly returns were 1.50% and .44%, respectively, for the quarters ended June
30, 1989 and March 31, 1994.
Average Annual Total Returns for
the Periods Ended December 31, 1998
1 Year 5 Year 10 Year
--------------------------------
Nuveen Municipal Money Market Fund 2.96% 2.91% 3.46%
- ---------------------------------------------------------------------------
Lipper Index/1/ 3.04% 3.06% 3.58%
Based on the seven-day period ended December 31, 1998, the fund's yield was
3.06%, and the taxable equivalent yield (using maximum federal income tax rate
of 39.6%) was 5.07%. For the fund's current yields, please call Nuveen at
(800) 257-8787.
<PAGE>
What are the Costs of Investing?
This table describes the fees and
expenses that you may pay if you
buy and hold shares of the fund.
Shareholder Transaction Expenses
Paid Directly From Your Investment
<TABLE>
<CAPTION>
<S> <C>
Maximum Sales Charge Imposed
on Purchases None
Maximum Sales Charge Imposed
on Reinvested Dividends None
Exchange Fees None
Annual Fund Operating Expenses
Paid From Fund Assets
Management Fees .49%
12b-1 Distribution and Service Fees/2/ .20%
Other Expenses .26%
- ------------------------------------------------
Total Operating Expenses--Gross+ .95%
+ After Expense Reimbursements
Expense Reimbursements -.20%
Total Operating Expenses--Net .75%
</TABLE>
Total Operating Expenses--Net reflect the undertaking of the fund's adviser
to reimburse expenses through December 31, 1999, in an amount necessary to
limit total operating expenses to .75%. Thereafter, reimbursements may be
modified or discontinued at the adviser's discretion without notice.
Example
The following example is intended to help you compare the cost of investing
in the fund with the cost of investing in other mutual funds. The example
assumes you invest $10,000 in the fund for the time periods indicated, and
then redeem all your shares at the end of a period. The example also assumes
that your investment has a 5% return each year and that the fund's operating
expenses remain the same. Your actual returns and costs may be higher or
lower.
<TABLE>
<CAPTION>
<S> <C>
1 Year $ 86
3 Years $ 268
5 Years $ 466
10 Years $1,037
How the Fund Is Invested (as of 05/31/99)
Portfolio Statistics
Weighted Average Maturity (Days) 37
Credit Quality
Industry Diversification (Top 5)
Healthcare 19%
Tax Obligations/General 18%
Long-Term Care 13%
Utilities 12%
Industrial/Other 7%
</TABLE>
1. Lipper Index returns reflect the performance of funds in the Lipper Municipal
Money Market Index. Returns assume reinvestment of dividends and do not
reflect any applicable sales charges.
2. The 12b-1 fees paid by the fund increased since the last fiscal year to .20%
because the number of authorized dealers has increased and Nuveen has begun
retaining 12b-1 fees on accounts with no authorized dealer for which Nuveen
provides on-going shareholder account services.
Section 1 The Fund 3
<PAGE>
Section 2 How We Manage Your Money
To help you understand how the fund's assets are managed,
this section includes a detailed discussion of the adviser's
investment and risk management strategies. For a more
complete discussion of these matters, please consult the
Statement of Additional Information.
Who Manages the Fund
Nuveen Investment Advisory Services provides advisory and
investment management services to a broad range of clients.
Nuveen Investment Advisory Services is comprised of Nuveen
Advisory Corp. and Nuveen Institutional Advisory Corp., both
of which are wholly-owned subsidiaries of John Nuveen & Co.
Incorporated (Nuveen). Nuveen Advisory Corp. (Nuveen
Advisory) is the fund's investment adviser and as such is
responsible for the selection and on-going monitoring of the
securities in the fund's portfolio, managing the fund's
business affairs and providing certain clerical, bookkeeping
and other administrative services. Nuveen Advisory is located
at 333 West Wacker Drive, Chicago, IL 60606. For providing
these services, Nuveen Advisory is paid an annual management
fee. For the most recent fiscal year, the Fund, as its
predecessor, paid .50% of its average net assets to Nuveen
Advisory for its services.
Founded in 1898, Nuveen has been synonymous with investments
that withstand the test of time. Today, we offer a broad
range of quality investments designed for individuals seeking
to build and maintain wealth. Nuveen is the sponsor and
principal underwriter of the fund's shares and has sponsored
or underwritten more than $60 billion of investment company
securities. Nuveen and its affiliates have approximately $50
billion in assets under management.
What Securities We Invest In
Municipal Money Market Securities
The Fund invests in high quality, short-term tax exempt debt
securities, commonly known as municipal money market
securities. Municipal money market securities pay income
which is exempt from regular federal income tax but may be
subject to the federal alternative minimum tax.
States and local governments, municipalities, agencies and
other governmental units issue municipal money market
securities to raise money for various public purposes, such
as building public facilities, refinancing outstanding debt
and financing general operating expenses. These securities
include general obligation bonds, which are backed by the
full faith and credit of the issuer and may be repaid from
any revenue source, and revenue bonds, which may be repaid
only from the revenue of a specific facility or source. These
securities also include notes, such as bond anticipation,
revenue anticipation, construction loans and bank notes, and
commercial paper.
4 Section 2 How We Manage Your Money
<PAGE>
Credit-Enhanced Investments
Some of the fund's investments may be backed by a letter of
credit or other type of credit enhancement. For example, if
an issuer does not have the desired credit rating, another
company may use its higher credit rating to back the issuer's
rating by selling the issuer a letter of credit. Investments
backed by a letter of credit are subject to the risk that the
company issuing the letter of credit will not be able to
fulfill its obligations to the fund, or is thought to be
unlikely to be able to do so. This could cause losses to the
fund and affect its share price.
Variable Rate and Floating Rate Demand Notes
We expect variable rate and floating rate securities will
comprise a large portion of the fund's portfolio. These
investments may have stated maturities of more than 397 days,
but generally allow the holder to receive payment of
principal plus accrued interest much sooner than this.
Because their interest rates are not fixed, the income earned
by the fund on these securities generally will fluctuate with
changes in short-term interest rates.
When-Issued and Delayed Delivery Transactions
The fund may buy or sell securities on a when-issued or
delayed delivery basis, paying for or taking delivery of the
securities at a later date, normally within 15-45 days of the
trade. These transactions involve an element of risk because
the value of the security to be purchased may decline before
the settlement date.
Temporary Strategies
The fund on a temporary basis may invest in taxable money
market securities. Taxable money market securities include
U.S. government securities, quality commercial paper or
similar fixed-income securities with remaining maturities of
one year or less. The fund will only do so under
extraordinary circumstances or unusual market conditions.
Under these circumstances, the fund will not be pursuing its
investment objective.
How We Select Investments
Nuveen Advisory selects money market instruments based on its
assessment of current market interest rates and its market
outlook. Portfolio managers are supported by a team of
specialized research analysts who review securities available
for purchase, monitor the continued creditworthiness of the
fund's investments, and analyze economic, political and
demographic trends affecting the municipal money market. We
seek to identify money market instruments with favorable
characteristics we believe are not yet recognized by the
market. We then select those higher-yielding and undervalued
money market instruments that we believe represent the most
attractive values without adding undue risk. We actively
manage the maturity of the fund and its portfolio to
optimally balance the fund's yield with the fund's exposure
to interest rate risk.
How We Manage Risk
Risk is inherent in all investing. Investing in a mutual
fund -- even a money market fund -- involves risk, including
the risk that you may receive little or no return on your
investment or even that you may lose part of your investment.
In pursuing its investment objective, the fund assumes
investment risk, chiefly in the form of interest rate and
credit risk. The fund tries to limit risk by restricting the
types and maturities of the money market instruments it
purchases, and by diversifying its investment portfolio among
issuers and across different industries. Therefore, before
Section 2 How We Manage Your Money 5
<PAGE>
investing, you should consider carefully the following risks
that you assume when you invest in the fund.
Interest rate risk: Because the fund invests in fixed-income
securities, the fund is subject to interest rate risk.
Interest rate risk is the risk that the value of the fund's
portfolio will decline because of rising interest rates.
Interest rate risk is generally lower for shorter-term
investments and higher for longer-term investments.
To mitigate interest rate risk, the fund, under normal market
conditions, maintains an investment portfolio with an overall
weighted average maturity of 90 days or less. In addition,
the fund limits its investments to money market instruments
with remaining effective maturities of 397 days or less.
Credit risk: The fund is subject to credit risk. Credit risk
is the risk that an issuer of a money market instrument will
be unable to meet its obligation to make interest and
principal payments due to changing financial or market
conditions, or possibly due to Year 2000 issues. (See below)
The fund attempts to mitigate credit risk by investing only
in high quality money market instruments that Nuveen Advisory
believes present minimal credit risks at the time of
purchase. High quality instruments are:
. rated in one of the two highest short-term rating
categories by at least two nationally recognized rating
services, or
. if only one service has rated the instrument, rated by that
service in one of its two highest short-term rating
categories, or
. unrated instruments that Nuveen Advisory judges to be of
comparable quality.
In addition, the fund will not invest more than 5% of its
total assets in money market instruments rated in the second
highest short-term rating categories or in their unrated
equivalents.
Year 2000 issues may affect the ability of municipal issuers
to meet their interest and principal payment obligations to
their bond holders, and may adversely affect the bonds'
credit ratings and values. Municipal issuers may have greater
Year 2000 risks than other issuers. Nuveen Advisory is
requesting information from municipal issuers so that Nuveen
Advisory can take the issuers' Year 2000 readiness, if made
available, into account in making investment decisions. There
can be no assurance that issuers will provide this
information to Nuveen Advisory, or that issuers will begin or
complete the work necessary to address any Year 2000 issues
on a timely basis. Generally, higher rated fixed-income
securities carry less credit risk than lower rated fixed-
income securities.
Concentration risk: Concentration risk is the risk that
economic or other developments affecting a single industry
may cause the value of related money market instruments to
decline.
To mitigate concentration risk, the fund will not invest more
than 25% of its assets in any one industry, excluding
governmental issuers. The fund may, however, invest more than
25% of its assets in a broad segment of the municipal market,
such as instruments issued to fund hospitals, housing or
airports, if Nuveen Advisory believes that the potential
returns justify any additional risks that may arise from
doing so. These policies on concentration risk may not be
changed without shareholder approval.
The fund may invest without limit in securities backed by
letters of credit or other credit enhancements issued by
banks and other financial institutions. As a result, changes
in the banking industry may cause the value of securities
backed by such credit enhancements to decline.
Insurance: The fund has purchased liability insurance against
a decline in the value of the fund's portfolio caused by the
default or bankruptcy of an issuer whose securities are owned
by the fund. The insurance covers substantially all of the
fund's investments except U.S. government securities. The
maximum total coverage for all Nuveen money market funds is
$50 million, with a deductible for each loss of 0.10% of the
fund's net assets. The fund pays the policy's premiums.
Coverage under the
An Important Note About Risk
Although the fund's investment policies are intended to minimize interest rate
and credit risk, there can be no guarantee of this.
6 Section 2 How We Manage Your Money
<PAGE>
policy is subject to certain conditions and may not be
renewable upon expiration. While the policy is intended to
provide some protection against credit risk and to help the
fund maintain a constant price per share of $1.00, there is
no guarantee that the insurance will do so.
Section 2 How We Manage Your Money 7
<PAGE>
Section 3 How You Can Buy and Sell Shares
We offer a number of services for your convenience. Please
see the Statement of Additional Information for further
details.
How to Buy Shares
The fund offers only a single class of shares. Fund shares
may be purchased at net asset value on any business day,
which is any day the Federal Reserve Bank of Boston is
normally open for business. Generally, the Bank is closed on
weekends and national holidays. The fund's net asset value is
determined at 12:00 noon Eastern Time on each business day,
and on other days where there is significant trading activity
in the fund's shares. If the fund receives your order in
proper form before 12:00 noon and the fund's custodian
receives federal funds from you before 3:00 p.m., Eastern
Time, you will receive the dividend declared and net asset
value computed on that day. Otherwise, you will receive the
next business day's dividend and net asset value.
Through a Financial Adviser
You may purchase shares through your financial adviser, who
can handle all the details for you, including opening a new
account. Financial advisers also can help you review your
financial needs and formulate long-term investment goals and
objectives. In addition, financial advisers generally can
help you develop a customized financial plan, select
investments, and monitor and review your portfolio on an on-
going basis to help assure that your investments continue to
meet your needs as circumstances change. Financial advisers
are paid for on-going investment advice and services either
from fund sales charges and fees or by charging you a
separate fee in lieu of a sales charge. If you do not have a
financial adviser, call (800) 257-8787 and Nuveen can refer
you to one in your area.
By Mail
You may open an account and buy shares through the mail by
completing the enclosed application and mailing it along with
your check to the fund, c/o Nuveen Investor Services, P.O.
Box 5186, Bowling Green Station, New York, NY 10274-5186.
Investment Minimums
The minimum initial investment is $3,000 ($50 if you
establish a systematic investment plan). Subsequent
investments must be in amounts of $50 or more. The fund
reserves the right to reject purchase orders and to waive or
increase the minimum investment requirements.
8 Section 3 How You Can Buy Sell Shares
<PAGE>
Systematic Investing
Once you have established a fund account, you may participate
in the fund's systematic investment plan. Systematic
investing allows you to make regular investments through
automatic deductions from your bank account or directly from
your paycheck. The minimum automatic deduction is $50 per
month. There is no charge to participate in the fund's
systematic investment plan. You can stop the deductions at
any time by notifying the fund in writing.
From Your Bank Account
You can make systematic investments by authorizing us to draw
preauthorized checks on your bank account. To do this, simply
complete the appropriate section of the account application
form or submit an account update form.
From Your Paycheck
With your employer's consent, you can make systematic
investments by authorizing your employer to deduct monies
from your paycheck. To do this, contact your financial
adviser or call Nuveen at (800) 257-8787.
Special Services
To help make your investing with us easy and efficient, we
offer you the following services at no extra cost.
Exchanging Shares
You may exchange fund shares into an identically registered
account at any time for an appropriate class of another
Nuveen mutual fund available in your state. Your exchange
must meet the minimum purchase requirements of the fund into
which you are exchanging. You may have to pay a sales charge
when exchanging shares that you purchased without a sales
charge for shares that are sold with a sales charge. Please
consult the Statement of Additional Information for details.
The fund may change or cancel its exchange policy at any time
upon 60 days' notice. Because an exchange is treated for tax
purposes as a purchase and sale, and any gain may be subject
to tax, you should consult your tax adviser about the tax
consequences of exchanging your shares.
Fund Direct/SM/
The Fund Direct Program allows you to link your fund account
to your bank account, transfer money electronically between
these accounts, and perform a variety of account
transactions, including purchasing shares by telephone and
investing through a systematic investment plan. You also may
have dividends, distributions, redemption payments or
systematic withdrawal plan payments sent directly to your
bank account. Your financial adviser can help you complete
the forms for these services, or you can call Nuveen at (800)
257-8787 for copies of the necessary forms.
Section 3 How You Can Buy and Sell Shares 9
<PAGE>
How to Sell Shares
You may sell (redeem) your shares on any business day. You
will receive the share price next determined after the fund
has received your properly completed redemption request. If
you are selling shares purchased recently with a check, you
will not receive your redemption proceeds until your check
has cleared. This may take up to ten days from your purchase
date.
Through Your Financial Adviser
You may sell your shares through your financial adviser who
can prepare the necessary documentation. Your adviser may
charge you for this service.
By Telephone
If you have authorized telephone redemption privileges, you
can redeem your shares by calling (800) 257-8787. Telephone
redemptions are not available if you own shares in
certificate form and may not exceed $50,000. Checks will only
be issued to you as the shareholder of record and mailed to
your address of record. If you have established Fund Direct
privileges, you may have redemption proceeds transferred
electronically to your bank account. We will normally mail
your check the next business day.
By Check
You may request that the fund provides you with redemption
checks. These checks may be made payable to any person in the
amount of $500 or more. Simply fill out the appropriate
section of the application form and submit the enclosed
signature card. You must have enough shares in your account
to cover the amount of each check you write or it will be
returned. Writing checks from your fund account does not mean
that your account is like a bank checking account. This check
redemption privilege may be modified or terminated at any
time.
By Mail
You can sell your shares at any time by sending a written
request to the fund, c/o Nuveen Investor Services, P.O. Box
5186, Bowling Green Station, New York, NY 10274-5186. Your
redemption request must include the following information:
. The fund's name;
. Your name and account number;
. The dollar or share amount you wish to redeem;
. The signature of each owner exactly as it appears on the
account;
. The name of the person to whom you want your redemption
proceeds paid (if other than to the shareholder of record);
. The address where you want your redemption proceeds sent
(if other than the address of record); and
. Any required signature guarantees (see below).
The fund will normally mail your check the next business day
after it receives your redemption request, but in no event
more than seven days after the fund receives your request. If
you purchased your shares by check, your redemption proceeds
will not be mailed until your check has cleared. This may
take up to ten days from your purchase date.
An Important Note About Telephone Transactions
Although Nuveen Investor Services has certain safeguards and procedures to
confirm the identity of callers, it will not be liable for losses resulting from
following telephone instructions it reasonably believes to be genuine. Also, you
should verify your trade confirmations immediately upon receipt.
10 Section 3 How You Can Buy and Sell Shares
<PAGE>
Signature Guarantees
Signature guarantees are required if you are redeeming more
than $50,000, you want the check payable to someone other
than the shareholder of record, you want the check sent to
another address, or if the address on the fund's records has
been changed within the last 60 days. Signature guarantees
must be obtained from a bank, brokerage firm or other
financial intermediary that is a member of an approved
Medallion Guarantee Program or that is otherwise approved by
the fund. A notary public cannot provide a signature
guarantee.
Systematic Withdrawal
If the value of your fund account is at least $10,000, you
may participate in the fund's systematic withdrawal plan. The
plan allows you to make regular withdrawals through automatic
deductions from your fund account. The minimum automatic
withdrawal is $50 per month. You may elect to receive
payments monthly, quarterly, semi-annually or annually, and
may choose to receive a check, or have the monies transferred
directly to your bank account (see "Special Services -- Fund
Direct" above), paid to a third party or sent payable to you
at an address other than the address on the fund's records.
To participate in the systematic withdrawal plan, simply
complete the appropriate section of the account application
or submit an account update form.
Redemptions In-Kind
The fund generally pays redemption proceeds in cash. Under
unusual conditions that make cash payment unwise and for the
protection of existing shareholders, the fund may pay all or
a portion of your redemption proceeds in securities or other
fund assets. Although it is unlikely that your shares would
be redeemed in-kind, you would probably have to pay brokerage
costs to sell the securities distributed to you, as well as
taxes on any capital gains from that sale.
An Important Note About Involuntary Redemption
From time to time, the fund may establish minimum account size requirements. The
fund reserves the right to liquidate your account upon 30 days' written notice
if the value of your account falls below an established minimum. The fund has
set a minimum account balance of $100 unless you have an active Nuveen Defined
Portfolio reinvestment account.
Section 3 How You Can Buy and Sell Shares 11
<PAGE>
Section 4 General Information
To help you understand the tax implications of investing in
the fund, this section includes important details about how
the fund makes distributions to shareholders. We discuss some
other fund policies, as well.
Dividends, Distributions and Taxes
The fund pays tax-free dividends monthly. In the very
unlikely event that the fund realizes capital gains or
ordinary income subject to regular federal income tax, it
will pay any capital gains or other taxable distributions
annually. The fund declares dividends on each business day to
shareholders of record on that day.
Payment and Reinvestment Options
The fund automatically reinvests your dividends in additional
fund shares unless you request otherwise. You may request to
have your dividends paid to you by check, deposited directly
into your bank account, paid to a third party, sent to an
address other than the address on the fund's records, or
reinvested in shares of another Nuveen mutual fund. For more
information, contact your financial adviser or call Nuveen at
(800) 257-8787.
Taxes and Tax Reporting
Because the fund invests in municipal money market
securities, your regular monthly dividends will be exempt
from regular federal income tax. A portion of these
dividends, however, may be subject to state and local taxes
or the federal alternative minimum tax.
Although very unlikely, the fund may, from time to time,
distribute taxable ordinary income or capital gains. Capital
gains are taxable to shareholders either as ordinary income
or as long-term capital gains, depending on how long the fund
owned the investment.
Early in each year, you will receive a statement detailing
the amount and nature of all dividends and capital gains that
you were paid during the prior year. If you hold your
investment at the firm where you purchased your fund shares,
you will receive the statement from that firm. If you hold
your shares directly at the fund, Nuveen will send you the
statement. The tax status of your dividends is the same
whether you reinvest your dividends or elect to receive them
in cash.
If you receive social security or railroad retirement
benefits, you should consult your tax adviser about how an
investment in the fund may affect the federal taxation of
your benefits.
Please note that if you do not furnish the fund with your
correct Social Security number or employer identification
number, federal law requires the fund to withhold federal
income tax from your distributions and redemption proceeds,
currently at a rate of 31%.
12 Section 4 General Information
<PAGE>
Please consult the Statement of Additional Information and your tax adviser for
more information about taxes.
Taxable Equivalent Yields
The taxable equivalent yield is the current yield you would need to earn on a
taxable investment in order to equal a stated tax-free yield on a municipal
investment. To assist you to more easily compare municipal investments like the
funds with taxable alternative investments, the table below presents the taxable
equivalent yields for a range of hypothetical tax-free yields and tax rates.
Taxable Equivalent Yield
- --------------------------------------------------------------------------------
Tax-Exempt Yields
<TABLE>
<S> <C> <C> <C> <C> <C>
Federal Tax Rates 2.00% 2.50% 3.00% 3.50% 4.00%
28.0% 2.78% 3.47% 4.17% 4.86% 5.56%
31.0% 2.90% 3.62% 4.35% 5.07% 5.80%
36.0% 3.13% 3.91% 4.69% 5.47% 6.25%
39.6% 3.31% 4.14% 4.97% 5.79% 6.62%
</TABLE>
The yields and tax rates shown above are hypothetical and do not predict your
actual returns or effective tax rate. For more detailed information, see the
Statement of Additional Information or consult your tax adviser.
Service Plan
Nuveen serves as the selling agent and distributor of the fund's shares. In this
capacity, Nuveen manages the offering of the fund's shares and is responsible
for all sales and promotional activities, and for providing certain services to
shareholders. The fund has adopted a service plan in accordance with Rule 12b-1
under the Investment Company Act of 1940 to reimburse Nuveen for these services.
Nuveen uses the service fee paid under the plan to compensate authorized
dealers, including Nuveen, for providing on-going account services to
shareholders. These services may include establishing and maintaining your
account, answering your questions and providing other personal services to you.
Because these fees are paid out of the fund's assets on an on-going basis, over
time these fees will increase the cost of your investment. Nuveen may, in its
discretion and from its own resources, pay certain financial service firms
additional amounts for services rendered to shareholders.
Service fees under the plan are paid in accordance with the following schedule:
<TABLE>
<CAPTION>
Average Daily Net Assets
of Serviced Accounts Fee
- --------------------------------------------------------------------------------
<S> <C>
Less than $2 million .10%
$2 million to $5 million .15%
$5 million to $10 million .20%
$10 million and over .25%
</TABLE>
Section 4 General Information 13
<PAGE>
Net Asset Value
The price you pay and receive for your shares is based on the
fund's net asset value per share, which is determined at
12:00 noon Eastern Time on each business day. Because the
fund seeks to maintain a constant price per share of $1.00,
the fund values its portfolio securities using the amortized
cost method, which approximates market value and is described
in more detail in the Statement of Additional Information.
There can be no assurance that the fund will be able to
maintain a constant price per share of $1.00.
Fund Service Providers
The custodian of the fund's assets is The Chase Manhattan
Bank, 4 New York Plaza, New York, NY 10004-2413. Chase also
provides certain accounting services to the fund. The fund's
transfer, shareholder services and dividend paying agent,
Chase Global Funds Services Company, P.O. Box 5186, New York,
NY 10274-5186, performs bookkeeping, data processing and
administrative services for the maintenance of shareholder
accounts.
Year 2000
The fund's service providers rely on computer systems to
manage the fund's investments, process shareholder
transactions and provide shareholder account maintenance.
Because of the way computers historically have stored dates,
some of these systems currently may not be able to correctly
process activity occurring in the year 2000. Nuveen is
working with the fund's service providers to adapt their
systems to address this issue. Nuveen and the fund expect
that the necessary work will be completed on a timely basis,
although there can be no assurance of this.
14 Section 4 General Information
<PAGE>
Section 5 Financial Highlights
Section 5 Financial Highlights 15
<PAGE>
Nuveen Mutual Funds
Nuveen offers a variety of mutual funds designed to help you
reach your financial goals. The funds below are grouped by
investment objectives.
Growth
Nuveen Rittenhouse Growth Fund
Growth and Income
Growth and Income Stock Fund
Balanced Stock and Bond Fund
Balanced Municipal and Stock Fund
Dividend and Growth Fund
European Value Fund
Income
Income Fund
Tax-Free Income
National Municipal Bond Funds
Long-term Intermediate-term
Insured Long-term Limited-term
<TABLE>
<CAPTION>
State Municipal Bond Funds
<S> <C> <C>
Arizona Louisiana North Carolina
California1/1/ Maryland Ohio
Colorado Massachusetts/1/ Pennsylvania
Connecticut Michigan Tennessee
Florida Missouri Virginia
Georgia New Jersey Wisconsin
Kansas New Mexico
Kentucky New York/1/
</TABLE>
Cash Reserves
Money Market Fund
Municipal Money Market Fund
California Tax-Exempt Money Market Fund
New York Tax-Exempt Money Market Fund
Several additional sources of information are available to
you. The Statement of Additional Information, incorporated by
reference into this prospectus, contains detailed information
on fund policies and operations. Shareholder reports contain
management's discussion of market conditions, investment
strategies and performance results as of the fund's latest
semi-annual or annual fiscal year end. Call Nuveen at (800)
257-8787 to request a free copy of any of these materials or
other fund information, or ask your financial adviser for
copies.
You also may 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
(800) SEC-0330 for room hours and operation. You also may
request fund information by writing to the SEC's Public
Reference Section, Washington, D.C. 20549. The fund's
Investment Company Act file number is 811-09267.
1. Long-term and insured long-term portfolios.
NUVEEN
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
MMPR-MM 4-99
(800) 257-8787
www.nuveen.com
<PAGE>
June 10, 1999 Prospectus
NUVEEN
Mutual Funds
Nuveen California Tax-Exempt
Money Market Fund
For investors
seeking
attractive double
tax-free income
and
stability
of principal
Featuring Portfolio Management By Nuveen Investment Advisory Services
A Premier Adviser/SM/ for Income Investing
- ------------------------------------------------------
The Securities and Exchange Commission has not
approved or disapproved these securities or
passed upon the adequacy of this prospectus. Any
representation to the contrary is a criminal offense.
- ------------------------------------------------------
<PAGE>
Table of Contents
Section 1 The Fund
This section provides you with an overview of the fund including investment
objectives, portfolio holdings and historical performance information.
Introduction 1
- --------------------------------------------------------------------------------
Nuveen California Tax-Exempt Money Market Fund 2
- --------------------------------------------------------------------------------
Section 2 How We Manage Your Money
This section gives you a detailed discussion of our investment and
risk management strategies.
Who Manages the Fund 4
- --------------------------------------------------------------------------------
What Securities We Invest In 4
- --------------------------------------------------------------------------------
How We Select Investments 5
- --------------------------------------------------------------------------------
How We Manage Risk 6
- --------------------------------------------------------------------------------
Section 3 How You Can Buy and Sell Shares
This section provides the information you need to move money into
and out of your account.
How to Buy Shares 8
- --------------------------------------------------------------------------------
Systematic Investing 9
- --------------------------------------------------------------------------------
Special Services 9
- --------------------------------------------------------------------------------
How to Sell Shares 10
- --------------------------------------------------------------------------------
Section 4 General Information
This section summarizes the fund's distribution policies and other
general information.
Dividends, Distributions and Taxes 12
- --------------------------------------------------------------------------------
Taxes and Reporting 12
- --------------------------------------------------------------------------------
Service Plan 13
- --------------------------------------------------------------------------------
Net Asset Value 14
- --------------------------------------------------------------------------------
Fund Service Providers 14
- --------------------------------------------------------------------------------
Year 2000 14
- --------------------------------------------------------------------------------
Section 5 Financial Highlights
This section provides the fund's financial performance for the past
five years. 15
- --------------------------------------------------------------------------------
We have used the icons below throughout this prospectus to make it easy for you
to find the type of information you need.
Investment
Strategy
Risks
Fees, Charges
and Expenses
Shareholder
Instructions
Performance and
Current Portfolio
Information
<PAGE>
June 10, 1999
Section 1 The Fund
Nuveen California Tax-Exempt Money Market Fund
Introduction
This prospectus is intended to provide important information to help you
evaluate whether the Nuveen California Tax-Exempt Money Market Fund may be right
for you. Please read it carefully before investing and keep it for future
reference.
Regular Income, Convenience and Stability of Principal
Money market funds offer you the opportunity to earn income on your cash
reserves while also providing easy access to your money and stability of
principal. They can provide a convenient way to make gradual transfers into
stock or bond funds, or to lower the overall risk of your portfolio.
The fund invests in high quality municipal money market securities that its
investment adviser believes present minimal credit risks. The fund's investment
policies are designed to mitigate overall risk and maintain a constant price per
share of $1.00, but there can be no guarantee of this.
--------------------------------------------------------------------------
| NOT FDIC OR GOVERNMENT INSURED MAY LOSE VALUE NO BANK GUARANTEE |
--------------------------------------------------------------------------
Section 1 The Fund 1
<PAGE>
Nuveen California Tax-Exempt Money Market Fund
Fund Overview
Investment Objective
The fund's investment objective is to provide as high a level of current income
exempt from both regular federal and California personal income taxes as is
consistent with the stability of principal and the maintenance of liquidity.
How the Fund Pursues Its Objective
The fund invests substantially all of its assets in high quality, California
tax-exempt money market instruments that the fund's investment adviser believes
present minimal credit risks. The adviser selects money market instruments based
on its assessment of current market interest rates and its market outlook. The
adviser seeks to identify money market instruments with favorable
characteristics the adviser believes are not yet recognized by the market.
What are the Risks of Investing in the Fund?
While the fund invests in securities its investment adviser believes present
minimal credit and interest rate risks, the fund is not risk free. The value of
the fund's investments may be adversely affected by changes in prevailing
interest rates, an issuer's credit quality or California's economy. The fund's
investment policies are designed to mitigate these risks and maintain a constant
price per share of $1.00, but there can be no guarantee of this. Like any mutual
fund investment, loss of money is a risk of investing.
Is This Fund Right for You?
The fund may be appropriate for you if you seek to:
. Earn regular income on your cash reserves with check-writing privileges;
. Maintain stability of principal;
. Make gradual transfers into stock or bond funds; or
. Lower the overall risk of your investment portfolio.
You should not invest in this fund if you seek to pursue long-term growth of
principal.
How the Fund Has Performed
The chart and table below illustrate annual fund returns for each of the past
ten years as well as annualized fund and index returns for the one-, five-year,
ten-year and since inception periods ended December 31, 1998. This information
is intended to help you assess the variability of fund returns over the past ten
years (and consequently, the potential rewards and risks of a fund investment).
Past performance is not necessarily an indication of future performance.
Total Returns
[BAR CHART APPEARS HERE]
Annual Returns*
1989 5.94%
1990 5.39%
1991 4.09%
1992 2.44%
1993 1.96%
1994 2.38%
1995 3.44%
1996 2.99%
1997 3.15%
1998 2.97%
*The year-to-date return as of March 31, 1999 was .56%.
During the last ten years ended December 31, 1998, the highest and lowest
quarterly returns were 1.56% and .45%, respectively, for the quarters ended June
30, 1989 and March 31, 1993.
<TABLE>
<CAPTION>
Average Annual Total Returns for
the Periods Ended December 31, 1998
-----------------------------------
1 Year 5 Year 10 Year
-----------------------------------
<S> <C> <C> <C>
Nuveen California Tax-Exempt
Money Market Fund 2.97% 2.99% 3.47%
- -------------------------------------------------------------------
Lipper Index/1/ 2.77% 3.00% 3.47%
</TABLE>
Based on the seven-day period ended December 31, 1998, the fund's yield was
3.08%, and the taxable equivalent yield (using maximum federal income tax rate
of 39.6%) was 5.10%. For the fund's current yields, please call Nuveen at (800)
257-8787.
2 Section 1 The Fund
<PAGE>
What are the Costs of Investing?
This table describes the fees and
expenses that you may pay if you
buy and hold shares of the fund.
<TABLE>
<CAPTION>
<S> <C>
Shareholder Transaction Expenses
Paid Directly From Your Investment
- ------------------------------------------------
Maximum Sales Charge Imposed
on Purchases None
- ------------------------------------------------
Maximum Sales Charge Imposed
on Reinvested Dividends None
- ------------------------------------------------
Exchange Fees None
- ------------------------------------------------
<CAPTION>
Annual Fund Operating Expenses
Paid From Fund Assets
<S> <C>
Management Fees .39%
- ------------------------------------------------
12b-1 Distribution and Service Fees/2/ .25%
- ------------------------------------------------
Other Expenses .10%
- ------------------------------------------------
Total Operating Expenses--Gross+ .74%
- ------------------------------------------------
+ After Expense Reimbursements
- ------------------------------------------------
Expense Reimbursements -.19%
- ------------------------------------------------
Total Operating Expenses--Net .55%
- ------------------------------------------------
</TABLE>
Total Operating Expenses--Net reflect the undertaking of the fund's advisor to
reimburse expenses through December 31, 1999 in an amount necessary to limit
total operating expenses to .55%. Thereafter, reimbursements may be terminated
or modified at the adviser's discretion without notice.
Example
The following example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. The example assumes
you invest $10,000 in the fund for the time periods indicated, and then redeem
all your shares at the end of a period. The example also assumes that your
investment has a 5% return each year and that the fund's operating expenses
remain the same. Your actual returns and costs may be higher or lower.
<TABLE>
<CAPTION>
<S> <C>
1 Year $ 66
- ------------------------------------------------
3 Years $208
- ------------------------------------------------
5 Years $362
- ------------------------------------------------
10 Years $810
- ------------------------------------------------
How the Fund Is Invested (as of 05/31/99)
<CAPTION>
<S> <C>
Portfolio Statistics
Weighted Average Maturity (Days) 29
- ------------------------------------------------
Credit Quality
Industry Diversification (Top 5)
Tax Obligation/General 23%
- ------------------------------------------------
Tax Obligation/Limited 18%
- ------------------------------------------------
Housing/Multifamily 17%
- ------------------------------------------------
Healthcare 16%
- ------------------------------------------------
Water and Sewer 9%
- ------------------------------------------------
</TABLE>
1. Lipper Index returns reflect the performance of funds in the Lipper
California Tax-Exempt Money Market Index. Returns assume reinvestment of
dividends and do not reflect any applicable sales charge.
2. The 12b-1 fees paid by the fund increased since the last fiscal year to .25%
because the number of authorized dealers has increased and Nuveen has begun
retaining 12b-1 fees on accounts with no authorized dealer for which Nuveen
provides on-going shareholder account services.
Section 1 The Fund 3
3
<PAGE>
Section 2 How We Manage Your Money
To help you understand how the fund's assets are managed, this section includes
a detailed discussion of the adviser's investment and risk management
strategies. For a more complete discussion of these matters, please consult the
Statement of Additional Information.
Who Manages the Fund
Nuveen Investment Advisory Services provides advisory and investment management
services to a broad range of clients. Nuveen Investment Advisory Services is
comprised of Nuveen Advisory Corp. and Nuveen Institutional Advisory Corp., both
of which are wholly-owned subsidiaries of John Nuveen & Co. Incorporated
(Nuveen). Nuveen Advisory Corp. (Nuveen Advisory) is the fund's investment
adviser and as such is responsible for the selection and on-going monitoring of
the securities in the fund's portfolio, managing the fund's business affairs and
providing certain clerical, bookkeeping and other administrative services.
Nuveen Advisory is located at 333 West Wacker Drive, Chicago, IL 60606. For
providing those services, Nuveen Advisory is paid an annual management fee. For
the most recent fiscal year, the Fund, as its predecessor, paid .40% of its
average net assets to Nuveen Advisory for its services.
Founded in 1898, Nuveen has been synonymous with investments that withstand the
test of time. Today, we offer a broad range of quality investments designed for
individuals seeking to build and maintain wealth. Nuveen is the sponsor and
principal underwriter of the fund's shares and has sponsored or underwritten
more than $60 billion of investment company securities. Nuveen and its
affiliates have approximately $50 billion in assets under management.
What Securities We Invest In
California Tax-Exempt Money Market Instruments
The fund invests in high quality, short-term California tax-exempt debt
securities, commonly known as California municipal money market securities
substantially all of which are issued within the State of California. California
municipal money market securities pay income which is exempt from both regular
federal income tax and California state personal income taxes.
States and local governments, municipalities, agencies and other governmental
units issue municipal money market instruments to raise money for various public
purposes, such as building public facilities, refinancing outstanding debt and
financing general operating expenses. These instruments include general
obligation bonds, which are backed by the full faith and credit of the issuer
and may be repaid from any revenue source, and revenue bonds, which may be
repaid only from the revenue of a specific facility or source. Tax-exempt
instruments also include notes, such as bond anticipation, revenue anticipation,
construction loan and bank notes, and commercial paper.
4 Section 2 How We Manage Your Money
<PAGE>
Credit-Enhanced Investments
Some of the fund's investments may be backed by a letter of credit or other type
of credit enhancement. For example, if an issuer does not have the desired
credit rating, another company may use its higher credit rating to back the
issuer's rating by selling the issuer a letter of credit. Investments backed by
a letter of credit are subject to the risk that the company issuing the letter
of credit will not be able to fulfill its obligations to the fund, or is thought
to be unlikely to be able to do so. This could cause losses to the fund and
affect its share price.
Variable Rate and Floating Rate Demand Notes
We expect variable rate and floating rate securities will comprise a large
portion of the fund's portfolio. These investments may have stated maturities of
more than 397 days, but generally allow the holder to receive payment of
principal plus accrued interest much sooner than this. Because their interest
rates are not fixed, the income earned by the fund on these securities generally
will fluctuate with changes in short-term interest rates.
When-Issued and Delayed Delivery Transactions
The fund may buy or sell securities on a when-issued or delayed delivery basis,
paying for or taking delivery of the securities at a later date, normally within
15-45 days of the trade. These transactions involve an element of risk because
the value of the security to be purchased may decline before the settlement
date.
Temporary Strategies
The fund on a temporary basis may invest in municipal money market securities
whose income is not exempt from California state personal income taxes, or in
taxable money market securities. Taxable money market securities include U.S.
government securities, quality commercial paper or similar fixed-income
securities with remaining maturities of one year or less. The fund will only do
so under extraordinary circumstances or unusual market conditions. Under these
circumstances, the fund will not be pursuing its investment objective.
Section 2 How We Manage Your Money 5
<PAGE>
An Important Note About Risk
Although the fund's investment policies are intended to minimize interest rate
and credit risk, there can be no guarantee of this.
How We Select Investments
Nuveen Advisory selects money market instruments based on its assessment of
current market interest rates and its market outlook. Portfolio managers are
supported by a team of specialized research analysts who review securities
available for purchase, monitor the continued creditworthiness of the fund's
investments, and analyze economic, political and demographic trends affecting
the California money market. We seek to identify money market instruments with
favorable characteristics we believe are not yet recognized by the market. We
then select those higher-yielding and undervalued money market instruments that
we believe represent the most attractive values without adding undue risk. We
actively manage the maturity of the fund and its portfolio to optimally balance
the fund's yield with the fund's exposure to interest rate risk.
How We Manage Risk
Risk is inherent in all investing. Investing in a mutual fund -- even a money
market fund -- involves risk, including the risk that you may receive little or
no return on your investment or even that you may lose part of your investment.
In pursuing its investment objective, the fund assumes investment risk, chiefly
in the form of interest rate and credit risk. The fund tries to limit risk by
restricting the types and maturities of the money market instruments it
purchases, and by diversifying its investment portfolio among issuers and across
different industries. Therefore, before investing, you should consider carefully
the following risks that you assume when you invest in the fund.
Interest rate risk: Because the fund invests in fixed-income securities, the
fund is subject to interest rate risk. Interest rate risk is the risk that the
value of the fund's portfolio will decline because of rising interest rates.
Interest rate risk is generally lower for shorter-term investments and higher
for longer-term investments.
To mitigate interest rate risk, the fund, under normal market conditions,
maintains an investment portfolio with an overall weighted average maturity of
90 days or less. In addition, the fund limits its investments to money market
instruments with remaining effective maturities of 397 days or less.
Credit risk: The fund is subject to credit risk. Credit risk is the risk that an
issuer of a money market instrument will be unable to meet its obligation to
make interest and principal payments due to changing financial or market
conditions, or possibly due to Year 2000 issues. (See below)
The fund attempts to mitigate credit risk by investing only in high quality
money market instruments that Nuveen Advisory believes present minimal credit
risks at the time of purchase. High quality instruments are:
. rated in one of the two highest short-term rating categories by at least two
nationally recognized rating services, or
6 Section 2 How We Manage Your Money
<PAGE>
. if only one service has rated the instrument, rated by that service in one of
its two highest short-term rating categories, or
. unrated instruments that Nuveen Advisory judges to be of comparable quality.
In addition, the fund will not invest more than 5% of its total assets in money
market instruments rated in the second highest short-term rating categories or
in their unrated equivalents.
Year 2000 issues may affect the ability of municipal issuers to meet their
interest and principal payment obligations to their bond holders, and may
adversely affect the bonds' credit ratings and values. Municipal issuers may
have greater Year 2000 risks than other issuers. Nuveen Advisory is requesting
information from municipal issuers so that Nuveen Advisory can take the issuers'
Year 2000 readiness, if made available, into account in making investment
decisions. There can be no assurance that issuers will provide this information
to Nuveen Advisory, or that issuers will begin or complete the work necessary to
address any Year 2000 issues on a timely basis. Generally, higher rated fixed-
income securities carry less credit risk than lower rated fixed-income
securities.
Concentration risk: Concentration risk is the risk that economic or other
developments affecting a single industry may cause the value of related money
market instruments to decline.
To mitigate concentration risk, the fund will not invest more than 25% of its
total assets in any one industry, excluding governmental issuers. The fund may,
however, invest more than 25% of its assets in a broad segment of the tax-exempt
market, such as instruments issued to fund hospitals, housing or airports, if
Nuveen Advisory believes that the potential returns justify any additional risks
that may arise from doing so. These policies on concentration risk may not be
changed without shareholder approval.
The fund may invest without limit in securities backed by letters of credit or
other credit enhancements issued by banks and other financial institutions. As a
result, changes in the banking industry may cause the value of securities backed
by such credit enhancements to decline.
State Specific Risk: Because the fund invests primarily in California municipal
money market securities, it bears investment risk from the economical, political
or regulatory changes that could adversely affect municipal issuers in the state
and therefore the value of the fund's portfolio. See "Appendix--Additional State
Information."
Insurance: The fund has purchased liability insurance against a decline in the
value of the fund's portfolio caused by the default or bankruptcy of an issuer
whose securities are owned by the fund. The insurance covers substantially all
of the fund's investments except U.S. government securities. The maximum total
coverage for all Nuveen money market funds is $50 million, with a deductible for
each loss of 0.10% of the fund's net assets. The fund pays the policy's
premiums. Coverage under the policy is subject to certain conditions and may not
be renewable upon expiration. While the policy is intended to provide some
protection against credit risk and to help the fund maintain a constant price
per share of $1.00, there is no guarantee that the insurance will do so.
Section 2 How We Manage Your Money 7
<PAGE>
Section 3 How You Can Buy and Sell Shares
We offer a number of services for your convenience. Please see the Statement of
Additional Information for further details.
How to Buy Shares
The fund offers only a single Class of Shares. Fund shares may be purchased at
net asset value on any business day, which is any day the Federal Reserve Bank
of Boston is normally open for business. Generally, the Bank is closed on
weekends and national holidays. The fund's net asset value is determined at
12:00 noon Eastern Time on each business day, and on other days where there is
significant trading activity in the fund's shares. If the fund receives your
order in proper form before 12:00 noon and the fund's custodian receives federal
funds from you before 3:00 p.m., Eastern Time, you will receive the dividend
declared and net asset value computed on that day. Otherwise, you will receive
the next business day's dividend and net asset value.
Through a Financial Adviser
You may purchase shares through your financial adviser, who can handle all the
details for you, including opening a new account. Financial advisers also can
help you review your financial needs and formulate long-term investment goals
and objectives. In addition, financial advisers generally can help you develop a
customized financial plan, select investments, and monitor and review your
portfolio on an on-going basis to help assure that your investments continue to
meet your needs as circumstances change. Financial advisers are paid for on-
going investment advice and services either from fund sales charges and fees or
by charging you a separate fee in lieu of a sales charge. If you do not have a
financial adviser, call (800) 257-8787 and Nuveen can refer you to one in your
area.
By Mail
You may open an account and buy shares through the mail by completing the
enclosed application and mailing it along with your check to the fund, c/o
Nuveen Investor Services, P.O. Box 5186, Bowling Green Station, New York, NY
10274-5186.
Investment Minimums
The minimum initial investment is $3,000 ($50 if you establish a systematic
investment plan). Subsequent investments must be in amounts of $50 or more. The
fund reserves the right to reject purchase orders and to waive or increase the
minimum investment requirements.
8 Section 3 How You Can Buy and Sell Shares
<PAGE>
- --------------------------------------------------------------------------------
Systematic Investing
- --------------------------------------------------------------------------------
Once you have established a fund account, you may participate in the fund's
systematic investment plan. Systematic investing allows you to make regular
investments through automatic deductions from your bank account or directly from
your paycheck. The minimum automatic deduction is $50 per month. There is no
charge to participate in the fund's systematic investment plan. You can stop the
deductions at any time by notifying the fund in writing.
From Your Bank Account
You can make systematic investments by authorizing us to draw preauthorized
checks on your bank account. To do this, simply complete the appropriate section
of the account application form or submit an account update form.
From Your Paycheck
With your employer's consent, you can make systematic investments by authorizing
your employer to deduct monies from your paycheck. To do this, contact your
financial adviser or call Nuveen at (800) 257-8787.
- --------------------------------------------------------------------------------
Special Services
- --------------------------------------------------------------------------------
To help make your investing with us easy and efficient, we offer you the
following services at no extra cost.
Exchanging Shares
You may exchange fund shares into an identically registered account at any time
for an appropriate class of another Nuveen mutual fund available in your state.
Your exchange must meet the minimum purchase requirements of the fund into which
you are exchanging. You may have to pay a sales charge when exchanging shares
that you purchased without a sales charge for shares that are sold with a sales
charge. Please consult the Statement of Additional Information for details.
The fund may change or cancel its exchange policy at any time upon 60 days'
notice. Because an exchange is treated for tax purposes as a purchase and sale,
and any gain may be subject to tax, you should consult your tax adviser about
the tax consequences of exchanging your shares.
Fund Direct/SM/
The Fund Direct Program allows you to link your fund account to your bank
account, transfer money electronically between these accounts, and perform a
variety of account transactions, including purchasing shares by telephone and
investing through a systematic investment plan. You also may have dividends,
distributions, redemption payments or systematic withdrawal plan payments sent
directly to your bank account. Your financial adviser can help you complete the
forms for these services, or you can call Nuveen at (800) 257-8787 for copies of
the necessary forms.
- --------------------------------------------------------------------------------
How to Sell Shares
- --------------------------------------------------------------------------------
You may sell (redeem) your shares on any business day. You will receive the
share price next determined after the fund has received your properly completed
redemption request. If you are selling shares purchased recently with a check,
you will not receive your redemption proceeds until your check has cleared. This
may take up to ten days from your purchase date.
Section 3 How You Can Buy and Sell Shares 9
<PAGE>
Through Your Financial Adviser
You may sell your shares through your financial adviser who can prepare the
necessary documentation. Your adviser may charge you for this
service.
By Telephone
If you have authorized telephone redemption privileges, you can redeem your
shares by calling (800) 257-8787. Telephone redemptions are not available if you
own shares in certificate form and may not exceed $50,000. Checks will only be
issued to you as the shareholder of record and mailed to your address of record.
If you have established Fund Direct privileges, you may have redemption proceeds
transferred electronically to your bank account. We will normally mail your
check the next business day.
By Check
You may request that the fund provides you with redemption checks. These checks
may be made payable to any person in the amount of $500 or more. Simply fill out
the appropriate section of the application form and submit the enclosed
signature card. You must have enough shares in your account to cover the amount
of each check you write or it will be returned. Writing checks from your fund
account does not mean that your account is like a bank checking account. This
check redemption privilege may be modified or terminated at any time.
By Mail
You can sell your shares at any time by sending a written request to the fund,
c/o Nuveen Investor Services, P.O. Box 5186, Bowling Green Station, New York, NY
10274-5186. Your redemption request must include the following information:
. The fund's name;
. Your name and account number;
. The dollar or share amount you wish to redeem;
. The signature of each owner exactly as it appears on the account;
. The name of the person to whom you want your redemption proceeds paid (if
other than to the shareholder of record);
. The address where you want your redemption proceeds sent (if other than the
address of record); and
. Any required signature guarantees (see below).
The fund will normally mail your check the next business day after it receives
your redemption request, but in no event more than seven days after the fund
receives your request. If you purchased your shares by check, your redemption
proceeds will not be mailed until your check has cleared. This may take up to
ten days from your purchase date.
Signature Guarantees
Signature guarantees are required if you are redeeming more than $50,000, you
want the check payable to someone other than the shareholder of
An Important Note About Telephone Transactions
Although Nuveen Investor Services has certain safeguards and procedures to
confirm the identity of callers, it will not be liable for losses resulting from
following telephone instructions it reasonably believes to be genuine. Also, you
should verify your trade confirmations immediately upon receipt.
10 Section 3 How You Can Buy and Sell Shares
<PAGE>
record, you want the check sent to another address, or if the address on the
fund's records has been changed within the last 60 days. Signature guarantees
must be obtained from a bank, brokerage firm or other financial intermediary
that is a member of an approved Medallion Guarantee Program or that is otherwise
approved by the fund. A notary public cannot provide a signature guarantee.
Systematic Withdrawal
If the value of your fund account is at least $10,000, you may participate in
the fund's systematic withdrawal plan. The plan allows you to make regular
withdrawals through automatic deductions from your fund account. The minimum
automatic withdrawal is $50 per month. You may elect to receive payments
monthly, quarterly, semi-annually or annually, and may choose to receive a
check, or have the monies transferred directly to your bank account (see
"Special Services -- Fund Direct" above), paid to a third party or sent payable
to you at an address other than the address on the fund's records. To
participate in the systematic withdrawal plan, simply complete the appropriate
section of the account application or submit an account update form.
Redemptions In-Kind
The fund generally pays redemption proceeds in cash. Under unusual conditions
that make cash payment unwise and for the protection of existing shareholders,
the fund may pay all or a portion of your redemption proceeds in securities or
other fund assets. Although it is unlikely that your shares would be redeemed
in-kind, you would probably have to pay brokerage costs to sell the securities
distributed to you, as well as taxes on any capital gains from that sale.
An Important Note About Involuntary Redemption
From time to time, the fund may establish minimum account size requirements. The
fund reserves the right to liquidate your account upon 30 days' written notice
if the value of your account falls below an established minimum. The fund
has set a minimum account balance of $100 unless you have an active Nuveen
Defined Portfolio reinvestment account.
Section 3 How You Can Buy and Sell Shares 11
<PAGE>
Section 4 General Information
To help you understand the tax implications of investing in the fund, this
section includes important details about how the fund makes distributions to
shareholders. We discuss some other fund policies, as well.
- --------------------------------------------------------------------------------
Dividends, Distributions and Taxes
- --------------------------------------------------------------------------------
The fund pays double tax-free dividends monthly. In the very unlikely event that
the fund realizes capital gains or ordinary income subject to regular federal
income tax, it will pay any capital gains or other taxable distributions
annually in March. The fund declares dividends on each business day to
shareholders of record on that day.
Payment and Reinvestment Options
The fund automatically reinvests your dividends in additional fund shares unless
you request otherwise. You may request to have your dividends paid to you by
check, deposited directly into your bank account, paid to a third party, sent to
an address other than the address on the fund's records, or reinvested in shares
of another Nuveen mutual fund. For more information, contact your financial
adviser or call Nuveen at (800) 257-8787.
- --------------------------------------------------------------------------------
Taxes and Tax Reporting
- --------------------------------------------------------------------------------
Because the fund invests in California municipal money market securities, your
regular monthly dividends will be exempt from regular federal as well as
California state income taxes. A portion of these dividends, however, may be
subject to the federal alternative minimum tax.
Although very unlikely, the fund may, from time to time, distribute taxable
ordinary income or capital gains. Capital gains are taxable to shareholders
either as ordinary income or as long-term capital gains, depending on how long
the fund owned the investment.
Early in each year, you will receive a statement detailing the amount and nature
of all dividends and capital gains that you were paid during the prior year. If
you hold your investment at the firm where you purchased your fund shares, you
will receive the statement from that firm. If you hold your shares directly at
the fund, Nuveen will send you the statement. The tax status of your dividends
is the same whether you reinvest your dividends or elect to receive them in
cash.
If you receive social security or railroad retirement benefits, you should
consult your tax adviser about how an investment in the fund may affect the
federal taxation of your benefits. The State of California does not tax any
portion of these benefits.
12 Section 4 General Information
<PAGE>
Please note that if you do not furnish the fund with your correct Social
Security number or employer identification number, federal law requires the fund
to withhold federal income tax from your distributions and redemption proceeds,
currently at a rate of 31%.
Please consult the Statement of Additional Information and your tax adviser for
more information about taxes.
Taxable Equivalent Yields
The taxable equivalent yield is the current yield you would need to earn on a
taxable investment in order to equal a stated tax-free yield on a municipal
investment. To assist you to more easily compare municipal investments like the
funds with taxable alternative investments, the table below presents the taxable
equivalent yields for a range of hypothetical tax-free yields and tax rates.
<TABLE>
<CAPTION>
Taxable Equivalent Yield
- ---------------------------------------------------------------------------
Combined Federal and Tax-Exempt Yields
State Tax Rates 2.00% 2.50% 3.00% 3.50% 4.00%
...........................................................................
<S> <C> <C> <C> <C> <C>
34.5% 3.05% 3.82% 4.58% 5.34% 6.11%
...........................................................................
37.5% 3.20% 4.00% 4.80% 5.60% 6.40%
...........................................................................
42.0% 3.45% 4.31% 5.17% 6.03% 6.90%
...........................................................................
45.0% 3.64% 4.55% 5.45% 6.36% 7.27%
...........................................................................
</TABLE>
The yields and tax rates shown above are hypothetical and do not predict your
actual returns or effective tax rate. For more detailed information, see the
Statement of Additional Information or consult your tax adviser.
Service Plan
Nuveen serves as the selling agent and distributor of the fund's shares. In this
capacity, Nuveen manages the offering of the fund's shares and is responsible
for all sales and promotional activities, and for providing certain services to
shareholders. The fund has adopted a service plan in accordance with Rule 12b-1
under the Investment Company Act of 1940 to reimburse Nuveen for these services.
The service fee payable under the plan is .25% of the average daily net assets
of serviced accounts. Nuveen uses this fee to compensate authorized dealers,
including Nuveen, for providing on-going account services to shareholders. These
services may include establishing and maintaining your account, answering your
questions and providing other personal services to you. Because these fees are
paid out of the fund's assets on an on-going basis, over time these fees will
increase the cost of your investment. Nuveen may, in its discretion and from its
own resources, pay certain financial service firms additional amounts for
services rendered to shareholders.
Net Asset Value
The price you pay and receive for your shares is based on the fund's net asset
value per share, which is determined at 12:00 noon Eastern Time on each business
day. Because the fund seeks to maintain a constant price per share of $1.00, the
fund values its portfolio securities using the amortized cost method, which
approximates market value and is described in more detail in the Statement of
Additional Information. There can be no
Section 4 General Information 13
<PAGE>
assurance that the fund will be able to maintain a constant price per share of
$1.00.
Fund Service Providers
The custodian of the fund's assets is The Chase Manhattan Bank, 4 New York
Plaza, New York, NY 10004-2413. Chase also provides certain accounting services
to the fund. The fund's transfer, shareholder services and dividend paying
agent, Chase Global Funds Services Company, P.O. Box 5186, New York, NY
10274-5186, performs bookkeeping, data processing and administrative services
for the maintenance of shareholder accounts.
Year 2000
The fund's service providers rely on computer systems to manage the fund's
investments, process shareholder transactions and provide shareholder account
maintenance. Because of the way computers historically have stored dates, some
of these systems currently may not be able to correctly process activity
occurring in the year 2000. Nuveen is working with the fund's service providers
to adapt their systems to address this issue. Nuveen and the fund expect that
the necessary work will be completed on a timely basis, although there can be no
assurance of this.
14 Section 4 General Information
<PAGE>
Section 5 Financial Highlights
Section 5 General Information 15
<PAGE>
Appendix Additional State Information
Because the fund invests primarily in California tax-exempt investments, it is
more vulnerable than more geographically diversified tax-exempt funds to the
California economy and issues encountered by tax exempt issuers in California
such as the inability or perceived inability of the state or local municipality
(or their agencies or instrumentalities) to collect sufficient tax or other
revenues to meet their payment obligations, the placement of constitutional or
statutory limits on a tax-exempt issuer's ability to raise revenues or increase
taxes, and economic or demographic factors that may cause a decrease in tax or
other revenues for the state or local municipality (or their agencies or
instrumentalities).
These factors, among others, may affect tax-exempt issuers' ability to pay their
obligations when due and may adversely impact the fund and its shareholders.
The State of California experienced economic recessions during the late
1980's/early 1990's, and the credit ratings assigned to California's general
obligation bonds were reduced by at least one rating agency since 1990. The
State of California may experience financial difficulties in the future, which
could lead to reductions in California's credit standing and the credit standing
of certain local governments.
16
<PAGE>
Nuveen Mutual Funds
Nuveen offers a variety of mutual funds designed to help you reach your
financial goals. The funds below are grouped by investment objectives.
Growth
Nuveen Rittenhouse Growth Fund
Growth and Income
Growth and Income Stock Fund
Balanced Stock and Bond Fund
Balanced Municipal and Stock Fund
Dividend and Growth Fund
European Value Fund
Income
Income Fund
Tax-Free Income
National Municipal Bond Funds
Long-term Intermediate-term
Insured Long-term Limited-term
State Municipal Bond Funds
Arizona Louisiana North Carolina
California/1/ Maryland Ohio
Colorado Massachusetts/1/ Pennsylvania
Connecticut Michigan Tennessee
Florida Missouri Virginia
Georgia New Jersey Wisconsin
Kansas New Mexico
Kentucky New York/1/
Cash Reserves
Money Market Fund
Municipal Money Market Fund
California Tax-Exempt Money Market Fund
New York Tax-Exempt Money Market Fund
Several additional sources of information are available to you. The Statement of
Additional Information, incorporated by reference into this prospectus, contains
detailed information on fund policies and operations. Shareholder reports
contain management's discussion of market conditions, investment strategies and
performance results as of the fund's latest semi-annual or annual fiscal year
end. Call Nuveen at (800) 257-8787 to request a free copy of any of these
materials or other fund information, or ask your financial adviser for copies.
You also may 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 (800) SEC-0330
for room hours and operation. You also may request fund information by writing
to the SEC's Public Reference Section, Washington, D.C. 20549. The fund's
Investment Company Act file number is 811-09267.
1. Long-term and insured long-term portfolios.
NUVEEN
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
(800) 257-8787
www.nuveen.com
MMPR-MM 6-99
<PAGE>
June 10, 1999 Prospectus
Mutual Funds
Nuveen New York Tax-Exempt
Money Market Fund
For investors
seeking
attractive triple
tax-free
income
and
stability
of principal
Featuring Portfolio Management By Nuveen Investment Advisory Services
A Premier Adviser/SM/ for Income Investing
- -----------------------------------------------------
The Securities and Exchange Commission has not
approved or disapproved these securities or
passed upon the adequacy of this prospectus. Any
representation to the contrary is a criminal offense.
- -----------------------------------------------------
<PAGE>
Table of Contents
Section 1 The Fund
This section provides you with an overview of the fund including investment
objectives, portfolio holdings and historical performance information.
Introduction 1
- -----------------------------------------------------------------------------
Nuveen New York Tax-Exempt Money Market Fund 2
- -----------------------------------------------------------------------------
Section 2 How We Manage Your Money
This section gives you a detailed discussion of our investment and risk
management strategies.
Who Manages the Fund 4
- -----------------------------------------------------------------------------
What Securities We Invest In 4
- -----------------------------------------------------------------------------
How We Select Investments 5
- -----------------------------------------------------------------------------
How We Manage Risk 6
- -----------------------------------------------------------------------------
Section 3 How You Can Buy and Sell Shares
This section provides the information you need to move money into and out of
your account.
How to Buy Shares 8
- -----------------------------------------------------------------------------
Systematic Investing 9
- -----------------------------------------------------------------------------
Special Services 9
- -----------------------------------------------------------------------------
How to Sell Shares 10
- -----------------------------------------------------------------------------
Section 4 General Information
This section summarizes the fund's distribution policies and other general
information.
Dividends, Distributions and Taxes 12
- -----------------------------------------------------------------------------
Taxes and Tax Reporting 12
- -----------------------------------------------------------------------------
Service Plan 13
- -----------------------------------------------------------------------------
Net Asset Value 14
- -----------------------------------------------------------------------------
Fund Service Providers 14
- -----------------------------------------------------------------------------
Year 2000 14
- -----------------------------------------------------------------------------
Section 5 Financial Highlights
This section provides the fund's financial performance
for the past five years. 15
- -----------------------------------------------------------------------------
We have used the icons below throughout this prospectus to make it easy for you
to find the type of information you need.
Investment
Strategy
Risks
Fees, Charges
and Expenses
Shareholder
Instructions
Performance and
Current Portfolio
Information
<PAGE>
Section 1 The Fund June 10, 1999
Nuveen New York Tax-Exempt Money Market Fund
Introduction
This prospectus is intended to provide important information to help you
evaluate whether the Nuveen New York Tax-Exempt Money Market Fund may be right
for you. Please read it carefully before investing and keep it for future
reference.
Regular Income, Convenience and Stability of Principal
Tax-free money market funds offer you the opportunity to earn tax-free income on
your cash reserves while also providing easy access to your money and stability
of principal. They can provide a convenient way to make gradual transfers into
stock or bond funds, or to lower the overall risk of your portfolio.
The fund invests in high quality municipal money market securities that its
investment adviser believes present minimal credit risks. The fund's investment
policies are designed to mitigate overall risk and maintain a constant price per
share of $1.00, but there can be no guarantee of this.
- --------------------------------------------------------------------------------
NOT FDIC OR GOVERNMENT INSURED MAY LOSE VALUE NO BANK GUARANTEE
- --------------------------------------------------------------------------------
Section 1 The Fund 1
<PAGE>
Nuveen New York Tax-Exempt Money Market Fund
Fund Overview
Investment Objective
The fund's investment objective is to provide as high a level of current income
exempt from both regular federal and New York personal income taxes as is
consistent with the stability of principal and the maintenance of liquidity.
How the Fund Pursues Its Objective
The Fund invests substantially all of its assets in high quality New York tax-
exempt money market instruments that the fund's investment adviser believes
present minimal credit risks. The adviser selects money market instruments based
on its assessment of current market interest rates and its market outlook. The
adviser seeks to identify money market instruments with favorable
characteristics the adviser believes are not yet recognized by the market.
What are the Risks of Investing in the Fund?
While the fund invests in securities its investment adviser believes present
minimal credit and interest rate risks, the fund is not risk free. The value of
the fund's investments may be adversely affected by changes in prevailing
interest rates, an issuer's credit quality or New York's economy. The fund's
investment policies are designed to mitigate these risks and maintain a constant
price per share of $1.00, but there can be no guarantee of this. Like any mutual
fund investment, loss of money is a risk of investing.
Is This Fund Right for You?
The fund may be appropriate for you if you seek to:
. Earn monthly tax-free income on your cash reserves with check-writing
privileges;
. Maintain stability of principal;
. Make gradual transfers into stock or bond funds; or
. Lower the overall risk of your investment portfolio.
You should not invest in this fund if you seek to pursue long-term growth of
principal.
How the Fund Has Performed
The chart and table below illustrate annual fund returns for each of the past
ten years as well as annualized fund and index returns for the one-, five-year,
ten-year and since inception periods ended December 31, 1998. This information
is intended to help you assess the variability of fund returns over the past ten
years (and consequently, the potential rewards and risks of a fund investment).
Past performance is not necessarily an indication of future performance.
Total Returns
[Bar Chart Appears Here] Annual Returns*
5.65% 5.19% 3.92% 2.23% 1.62% 2.17% 3.45% 2.92% 3.15% 2.87%
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
* The year-to-date return as of March 31, 1999 was .56%.
During the last ten years ended December 31, 1998, the highest and lowest
quarterly returns were 1.46% and .34%, respectively, for the quarters ended June
30, 1989 and March 31, 1993.
<TABLE>
<CAPTION>
Average Annual Total Returns for
the Periods Ended December 31, 1998
-----------------------------------
1 Year 5 Year 10 Year
<S> <C> <C> <C>
Nuveen New York Tax-Exempt Money Market Fund 2.87% 2.91% 3.31%
-------------------------------------------------------------------------------
Lipper Index/1/ 2.84% 2.89% 3.34%
</TABLE>
Based on the seven-day period ended December 31, 1998, the fund's yield was
3.08%, and the taxable equivalent yield (using maximum federal income tax rate
of 39.6%) was 5.10%. For the fund's current yields, please call Nuveen at (800)
257-8787.
2 Section 1 The Fund
<PAGE>
What are the Costs of Investing?
This table describes the fees and
expenses that you may pay if you
buy and hold shares of the fund.
Shareholder Transaction Expenses
Paid Directly From Your Investment
<TABLE>
<CAPTION>
<S> <C>
- -----------------------------------------------------------------
Maximum Sales Charge Imposed
on Purchases None
- -----------------------------------------------------------------
Maximum Sales Charge Imposed
on Reinvested Dividends None
- -----------------------------------------------------------------
Exchange Fees None
- -----------------------------------------------------------------
Annual Fund Operating Expenses
Paid From Fund Assets
- -----------------------------------------------------------------
Management Fees .40%
- -----------------------------------------------------------------
12b-1 Distribution and Service Fees/2/ .25%
- -----------------------------------------------------------------
Other Expenses .29%
- -----------------------------------------------------------------
Total Operating Expenses--Gross+ .94%
- -----------------------------------------------------------------
+ After Expense Reimbursements
- -----------------------------------------------------------------
Expense Reimbursements -- .39%
- -----------------------------------------------------------------
Total Operating Expenses--Net .55%
- -----------------------------------------------------------------
</TABLE>
Total Operating Expenses--Net reflect the undertaking of the fund's adviser to
reimburse expenses through December 31, 1999 in an amount necessary to limit
total operating expenses to .55%. Thereafter, reimbursements may be modified or
discontinued at the adviser's discretion without notice.
Example
The following example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. The example assumes
you invest $10,000 in the fund for the time periods indicated, and then redeem
all your shares at the end of a period. The example also assumes that your
investment has a 5% return each year and that the fund's operating expenses
remain the same. Your actual returns and costs may be higher or lower.
<TABLE>
<CAPTION>
<S> <C>
1 Year $77
- ----------------------------------------------------
3 Years $240
- ----------------------------------------------------
5 Years $417
- ----------------------------------------------------
10 Years $930
- ----------------------------------------------------
How the Fund Is Invested (as of 05/31/99)
Portfolio Statistics
<CAPTION>
<S> <C>
Weighted Average Maturity (Days) 39
- ----------------------------------------------------
Credit Quality
<CAPTION>
Industry Diversification (Top 5)
- ----------------------------------------------------
Tax Obligations/General 24%
- ----------------------------------------------------
Education and Civic Organizations 17%
- ----------------------------------------------------
Tax Obligations/Limited 12%
- ----------------------------------------------------
Housing/Multifamily 9%
- ----------------------------------------------------
Long-Term Care 9%
- ----------------------------------------------------
</TABLE>
1. Lipper Index returns reflect the performance of mutual funds in the Lipper
New York Tax-Exempt Money Market Index. Returns assume reinvestment of
dividends and do not reflect any applicable sales charges.
2. The 12b-1 fees paid by the fund increased since the last fiscal year to .25%
because the number of authorized dealers has increased and Nuveen has begun
retaining 12b-1 fees on accounts with no authorized dealer for which Nuveen
provides on-going shareholder account services.
Section 1 The Fund 3
<PAGE>
Section 2 How We Manage Your Money
To help you understand how the fund's assets are managed, this section includes
a detailed discussion of the adviser's investment and risk management
strategies. For a more complete discussion of these matters, please consult the
Statement of Additional Information.
Who Manages the Fund
Nuveen Investment Advisory Services provides advisory and investment management
services to a broad range of clients. Nuveen Investment Advisory Services is
comprised of Nuveen Advisory Corp. and Nuveen Institutional Advisory Corp., both
of which are wholly-owned subsidiaries of John Nuveen & Co. Incorporated
(Nuveen). Nuveen Advisory Corp. (Nuveen Advisory) is the fund's investment
adviser and as such is responsible for the selection and on-going monitoring of
the securities in the fund's portfolio, managing the fund's business affairs and
providing certain clerical, bookkeeping and other administrative services.
Nuveen Advisory is located at 333 West Wacker Drive, Chicago, IL 60606. For
providing these services, Nuveen Advisory is paid an annual management fee. For
the most recent fiscal year, the fund, as its predecessor, paid .40% of its
average net assets to Nuveen Advisory for its services.
Founded in 1898, Nuveen has been synonymous with investments that withstand the
test of time. Today, we offer a broad range of quality investments designed for
individuals seeking to build and maintain wealth. Nuveen is the sponsor and
principal underwriter of the fund's shares and has sponsored or underwritten
more than $60 billion of investment company securities. Nuveen and its
affiliates have approximately $50 billion in assets under management.
What Securities We Invest In
New York Tax-Exempt Money Market Instruments
The Fund invests in high quality, short-term New York tax-exempt debt
securities, commonly known as New York municipal money market securities
substantially all of which are issued within the State of New York. New York
municipal money market securities pay income which is exempt from both regular
federal income tax and New York state and local personal income taxes.
States and local governments, municipalities, agencies and other governmental
units issue municipal money market securities to raise money for various public
purposes, such as building public facilities, refinancing outstanding debt and
financing general operating expenses. These securities include general
obligation bonds, which are backed by the full faith and credit of the issuer
and may be repaid from any revenue source, and revenue bonds, which may be
repaid only from the revenue of a specific facility or source. Tax-exempt
securities also include notes, such
4 Section 2 How We Manage Your Money
<PAGE>
as bond anticipation, revenue anticipation, construction loan and bank notes,
and commercial paper.
Credit-Enhanced Investments
Some of the fund's investments may be backed by a letter of credit or other type
of credit enhancements. For example, if an issuer does not have the desired
credit rating, another company may use its higher credit rating to back the
issuer's rating by selling the issuer a letter of credit. Investments backed by
a letter of credit are subject to the risk that the company issuing the letter
of credit will not be able to fulfill its obligations to the fund, or is thought
to be unlikely to be able to do so. This could cause losses to the fund and
affect its share price.
Variable Rate and Floating Rate Demand Notes
We expect variable rate and floating rate securities will comprise a large
portion of the fund's portfolio. These investments may have stated maturities of
more than 397 days, but generally allow the holder to receive payment of
principal plus accrued interest much sooner than this. Because their interest
rates are not fixed, the income earned by the fund on these securities generally
will fluctuate with changes in short-term interest rates.
When-Issued and Delayed Delivery Transactions
The fund may buy or sell securities on a when-issued or delayed delivery basis,
paying for or taking delivery of the securities at a later date, normally within
15-45 days of the trade. These transactions involve an element of risk because
the value of the security to be purchased may decline before the settlement
date.
Temporary Strategies
The fund on a temporary basis may invest in municipal money market securities
whose income is not exempt from New York state and local personal income
taxes, or in taxable money market securities. Taxable money market securities
include U.S. government securities, quality commercial paper or similar fixed-
income securities with remaining maturities of one year or less. The fund will
only do so under extraordinary circumstances or unusual market conditions. Under
these circumstances, the fund will not be pursuing its investment objective.
How We Select Investments
Nuveen Advisory selects money market instruments based on its assessment of
current market interest rates and its market outlook. Portfolio managers are
supported by a team of specialized research analysts who review securities
available for purchase, monitor the continued creditworthiness of the fund's
investments, and analyze economic, political and demographic trends affecting
the New York money market. We seek to identify money market instruments with
favorable characteristics we believe are not yet recognized by the market. We
then select those higher-yielding and undervalued money market instruments that
we believe represent the most attractive values without adding undue risk. We
actively manage the maturity of the fund and its portfolio to optimally balance
the fund's yield with the fund's exposure to interest rate risk.
Section 2 How We Manage Your Money 5
<PAGE>
How We Manage Risk
Risk is inherent in all investing. Investing in a mutual fund -- even a money
market fund -- involves risk, including the risk that you may receive little or
no return on your investment or even that you may lose part of your investment.
In pursuing its investment objective, the fund assumes investment risk, chiefly
in the form of interest rate and credit risk. The fund tries to limit risk by
restricting the types and maturities of the money market instruments it
purchases, and by diversifying its investment portfolio among issuers and across
different industries. Therefore, before investing, you should consider carefully
the following risks that you assume when you invest in the fund.
Interest rate risk: Because the fund invests in fixed-income securities, the
fund is subject to interest rate risk. Interest rate risk is the risk that the
value of the fund's portfolio will decline because of rising interest rates.
Interest rate risk is generally lower for shorter-term investments and higher
for longer-term investments.
To mitigate interest rate risk, the fund, under normal market conditions,
maintains an investment portfolio with an overall weighted average maturity of
90 days or less. In addition, the fund limits its investments to money market
instruments with remaining effective maturities of 397 days or less.
Credit risk: The fund is subject to credit risk. Credit risk is the risk that an
issuer of a money market instrument will be unable to meet its obligation to
make interest and principal payments due to changing financial or market
conditions, or possibly due to Year 2000 issues. (See below)
The fund attempts to mitigate credit risk by investing only in high quality
money market instruments that Nuveen Advisory believes present minimal credit
risks at the time of purchase. High quality instruments are:
. rated in one of the two highest short-term rating categories by at least two
nationally recognized rating services, or
. if only one service has rated the instrument, rated by that service in one of
its two highest short-term rating categories, or
. unrated instruments that Nuveen Advisory judges to be of comparable quality.
In addition, the fund will not invest more than 5% of its total assets in money
market instruments rated in the second highest short-term rating categories or
in their unrated equivalents.
Year 2000 issues may affect the ability of municipal issuers to meet their
interest and principal payment obligations to their bond holders, and may
adversely affect the bonds' credit ratings and values. Municipal issuers may
have greater Year 2000 risks than other issuers. Nuveen Advisory is requesting
information from municipal issuers so that Nuveen Advisory can take the issuers'
Year 2000 readiness, if made available, into account in making investment
decisions. There can be no assurance that issuers will provide this information
to Nuveen Advisory, or that issuers will begin or complete the work necessary to
address any Year 2000 issues on a timely basis. Generally, higher rated fixed-
income securities carry less credit risk than lower rated fixed-income
securities.
Concentration risk: Concentration risk is the risk that economic or other
developments affecting a single industry may cause the value of related money
market instruments to decline.
To mitigate concentration risk, the fund will not invest more than 25% of its
total assets in any one industry, excluding governmental issuers. The fund may,
however, invest more than 25% of its assets in a broad segment
An Important Note About Risk
Although the fund's investment policies are intended to minimize interest rate
and credit risk, there can be no guarantee of this.
6 Section 2 How We Manage Your Money
<PAGE>
of the tax-exempt market, such as instruments issued to fund hospitals, housing
or airports, if Nuveen Advisory believes that the potential returns justify any
additional risks that may arise from doing so. These policies on concentration
risk may not be changed without shareholder approval.
The fund may invest without limit in securities backed by letters of credit or
other credit enhancements issued by banks and other financial institutions. As a
result, changes in the banking industry may cause the value of securities backed
by such credit enhancements to decline.
State Specific Risk
Because the fund invests primarily in New York municipal money market securities
it bears investment risk from the economical, political or regulatory changes
that could adversely affect municipal issuers in the state and therefore the
value of the fund's portfolio. See "Appendix--Additional State Information."
Insurance: The fund has purchased liability insurance against a decline in the
value of the fund's portfolio caused by the default or bankruptcy of an issuer
whose securities are owned by the fund. The insurance covers substantially all
of the fund's investments except U.S. government securities. The maximum total
coverage for all Nuveen money market funds is $50 million, with a deductible for
each loss of 0.10% of the fund's net assets. The fund pays the policy's
premiums. Coverage under the policy is subject to certain conditions and may not
be renewable upon expiration. While the policy is intended to provide some
protection against credit risk and to help the fund maintain a constant price
per share of $1.00, there is no guarantee that the insurance will do so.
Section 2 How We Manage Your Money 7
<PAGE>
Section 3 How You Can Buy and Sell Shares
We offer a number of services for your convenience. Please see the Statement of
Additional Information for further details.
How to Buy Shares
The fund offers only a single class of shares. Fund shares may be purchased at
net asset value on any business day, which is any day the Federal Reserve Bank
of Boston is normally open for business. Generally, the bank is closed on
weekends and National holidays. The fund's net asset value is determined at
12:00 noon Eastern Time on each business day, and on other days where there is
significant trading activity in the fund's shares. If the fund receives your
order in proper form before 12:00 noon and the fund's custodian receives federal
funds from you before 3:00 p.m., Eastern Time, you will receive the dividend
declared and net asset value computed on that day. Otherwise, you will receive
the next business day's dividend and net asset value.
Through a Financial Adviser
You may purchase shares through your financial adviser, who can handle all the
details for you, including opening a new account. Financial advisers also can
help you review your financial needs and formulate long-term investment goals
and objectives. In addition, financial advisers generally can help you develop a
customized financial plan, select investments, and monitor and review your
portfolio on an on-going basis to help assure that your investments continue to
meet your needs as circumstances change. Financial advisers are paid for on-
going investment advice and services either from fund sales charges and fees or
by charging you a separate fee in lieu of a sales charge. If you do not have a
financial adviser, call (800) 257-8787 and Nuveen can refer you to one in your
area.
By Mail
You may open an account and buy shares through the mail by completing the
enclosed application and mailing it along with your check to the fund, c/o
Nuveen Investor Services, P.O. Box 5186, Bowling Green Station, New York, NY
10274-5186.
Investment Minimums
The minimum initial investment in the Fund is $3,000 ($50 if you establish a
systematic investment plan). Subsequent investments must be in amounts of $50 or
more. The fund reserves the right to reject purchase orders and to waive or
increase the minimum investment requirements.
8 Section 3 How You Can Buy and Sell Shares
<PAGE>
Systematic Investing
Once you have established a fund account, you may participate in the fund's
systematic investment plan. Systematic investing allows you to make regular
investments through automatic deductions from your bank account or directly from
your paycheck. The minimum automatic deduction is $50 per month. There is no
charge to participate in the fund's systematic investment plan. You can stop the
deductions at any time by notifying the fund in writing.
From Your Bank Account
You can make systematic investments by authorizing us to draw preauthorized
checks on your bank account. To do this, simply complete the appropriate section
of the account application form or submit an account update form.
From Your Paycheck
With your employer's consent, you can make systematic investments by authorizing
your employer to deduct monies from your paycheck. To do this, contact your
financial adviser or call Nuveen at (800) 257-8787.
Special Services
To help make your investing with us easy and efficient, we offer you the
following services at no extra cost.
Exchanging Shares
You may exchange fund shares into an identically registered account at any time
for an appropriate class of another Nuveen mutual fund available in your state.
Your exchange must meet the minimum purchase requirements of the fund into which
you are exchanging. You may have to pay a sales charge when exchanging shares
that you purchased without a sales charge for shares that are sold with a sales
charge. Please consult the Statement of Additional Information for details.
The fund may change or cancel its exchange policy at any time upon 60 days'
notice. Because an exchange is treated for tax purposes as a purchase and sale,
and any gain may be subject to tax, you should consult your tax adviser about
the tax consequences of exchanging your shares.
Fund Direct/SM/
The Fund Direct Program allows you to link your fund account to your bank
account, transfer money electronically between these accounts, and perform a
variety of account transactions, including purchasing shares by telephone and
investing through a systematic investment plan. You also may have dividends,
distributions, redemption payments or systematic withdrawal plan payments sent
directly to your bank account. Your financial adviser can help you complete the
forms for these services, or you can call Nuveen at (800) 257-8787 for copies of
the necessary forms.
Section 3 How You Can Buy and Sell Shares 9
<PAGE>
An Important Note About Telephone Transactions
Although Nuveen Investor Services has certain safeguards and procedures to
confirm the identity of callers, it will not be liable for losses resulting from
following telephone instructions it reasonably believes to be genuine. Also, you
should verify your trade confirmations immediately upon receipt.
How to Sell Shares
You may sell (redeem) your shares on any business day. You will receive the
share price next determined after the fund has received your properly completed
redemption request. If you are selling shares purchased recently with a check,
you will not receive your redemption proceeds until your check has cleared. This
may take up to ten days from your purchase date.
Through Your Financial Adviser
You may sell your shares through your financial adviser who can prepare the
necessary documentation. Your adviser may charge you for this service.
By Telephone
If you have authorized telephone redemption privileges, you can redeem your
shares by calling (800) 257-8787. Telephone redemptions are not available if you
own shares in certificate form and may not exceed $50,000. Checks will only be
issued to you as the shareholder of record and mailed to your address of record.
If you have established Fund Direct privileges, you may have redemption proceeds
transferred electronically to your bank account. We will normally mail your
check the next business day.
By Check
You may request that the fund provides you with redemption checks. These checks
may be made payable to any person in the amount of $500 or more. Simply fill out
the appropriate section of the application form and submit the enclosed
signature card. You must have enough shares in your account to cover the amount
of each check you write or it will be returned. Writing checks from your fund
account does not mean that your account is like a bank checking account. This
check redemption privilege may be modified or terminated at any time.
By Mail
You can sell your shares at any time by sending a written request to the fund,
c/o Nuveen Investor Services, P.O. Box 5186, Bowling Green Station, New York, NY
10274-5186. Your redemption request must include the following information:
. The fund's name;
. Your name and account number;
. The dollar or share amount you wish to redeem;
. The signature of each owner exactly as it appears on the account;
. The name of the person to whom you want your redemption proceeds paid (if
other than to the shareholder of record);
. The address where you want your redemption proceeds sent (if other than the
address of record); and
. Any required signature guarantees (see below).
10 Section 3 How You Can Buy and Sell Shares
<PAGE>
An Important Note About Involuntary Redemption
From time to time, the fund may establish minimum account size requirements. The
fund reserves the right to liquidate your account upon 30 days' written notice
if the value of your account falls below an established minimum. The fund has
set a minimum account balance of $100 unless you have an active Nuveen Defined
Portfolio reinvestment account.
The fund will normally mail your check the next business day after it receives
your redemption request, but in no event more than seven days after the fund
receives your request. If you purchased your shares by check, your redemption
proceeds will not be mailed until your check has cleared. This may take up to
ten days from your purchase date.
Signature Guarantees
Signature guarantees are required if you are redeeming more than $50,000, you
want the check payable to someone other than the shareholder of record, you want
the check sent to another address, or if the address on the fund's records has
been changed within the last 60 days. Signature guarantees must be obtained from
a bank, brokerage firm or other financial intermediary that is a member of an
approved Medallion Guarantee Program or that is otherwise approved by the fund.
A notary public cannot provide a signature guarantee.
Systemic Withdrawal
If the value of your fund account is at least $10,000, you may participate in
the fund's systematic withdrawal plan. The plan allows you to make regular
withdrawals through automatic deductions from your fund account. The minimum
automatic withdrawal is $50 per month. You may elect to receive payments
monthly, quarterly, semi-annually or annually, and may choose to receive a
check, or have the monies transferred directly to your bank account (see
"Special Services -- Fund Direct" above), paid to a third party or sent payable
to you at an address other than the address on the fund's records. To
participate in the systematic withdrawal plan, simply complete the appropriate
section of the account application or submit an account update form.
Redemptions In-Kind
The fund generally pays redemption proceeds in cash. Under unusual conditions
that make cash payment unwise and for the protection of existing shareholders,
the fund may pay all or a portion of your redemption proceeds in securities or
other fund assets. Although it is unlikely that your shares would be redeemed
in-kind, you would probably have to pay brokerage costs to sell the securities
distributed to you, as well as taxes on any capital gains from that sale.
Section 3 How You Can Buy and Sell Shares 11
<PAGE>
Section 4 General Information
To help you understand the tax implications of investing in the fund, this
section includes important details about how the fund makes distributions to
shareholders. We discuss some other fund policies, as well.
Dividends, Distributions and Taxes
The fund pays triple tax-free dividends monthly. In the very unlikely event that
the fund realizes capital gains or ordinary income subject to regular federal
income tax, it will pay any capital gains or other taxable distributions
annually in March. The fund declares dividends on each business day to
shareholders of record on that day.
Payment and Reinvestment Options
The fund automatically reinvests your dividends in additional fund shares unless
you request otherwise. You may request to have your dividends paid to you by
check, deposited directly into your bank account, paid to a third party, sent to
an address other than the address on the fund's records, or reinvested in shares
of another Nuveen mutual fund. For more information, contact your financial
adviser or call Nuveen at (800) 257-8787.
Taxes and Tax Reporting
Because the fund invests in New York municipal money market securities, your
regular monthly dividends will be exempt from regular federal as well as New
York state and local income taxes. A portion of these dividends, however, may
be subject to the federal alternative minimum tax.
Although very unlikely, the fund may, from time to time, distribute taxable
ordinary income or capital gains. Capital gains are taxable to shareholders
either as ordinary income or as long-term capital gains, depending on how long
the fund owned the investment.
Early in each year, you will receive a statement detailing the amount and nature
of all dividends and capital gains that you were paid during the prior year. If
you hold your investment at the firm where you purchased your fund shares, you
will receive the statement from that firm. If you hold your shares directly at
the fund, Nuveen will send you the statement. The tax status of your dividends
is the same whether you reinvest your dividends or elect to receive them in
cash.
If you receive social security or railroad retirement benefits, you should
consult your tax adviser about how an investment in the fund may affect the
federal taxation of your benefits. The State of New York does not tax any
portion of these benefits.
Please note that if you do not furnish the fund with your correct Social
Security number or employer identification number, federal law requires
12 Section 4 General Information
<PAGE>
the fund to withhold federal income tax from your distributions and redemption
proceeds, currently at a rate of 31%.
Please consult the Statement of Additional Information and your tax adviser for
more information about taxes.
Taxable Equivalent Yields
The taxable equivalent yield is the current yield you would need to earn on a
taxable investment in order to equal a stated tax-free yield on a municipal
investment. To assist you to more easily compare municipal investments like the
funds with taxable alternative investments, the table below presents the taxable
equivalent yields for a range of hypothetical tax-free yields and tax rates.
<TABLE>
<CAPTION>
Taxable Equivalent Yield
- --------------------------------------------------------------------------------
Combined State and Tax-Exempt Yields
Federal Tax Rates 2.00% 2.50% 3.00% 3.50% 4.00%
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
33.0% 2.99% 3.73% 4.48% 5.22% 5.97%
- --------------------------------------------------------------------------------
35.5% 3.10% 3.88% 4.65% 5.43% 6.20%
- --------------------------------------------------------------------------------
40.5% 3.36% 4.20% 5.04% 5.88% 6.72%
- --------------------------------------------------------------------------------
43.5% 3.54% 4.42% 5.31% 6.19% 7.08%
- --------------------------------------------------------------------------------
</TABLE>
The yields and tax rates shown above are hypothetical and do not predict your
actual returns or effective tax rate. For more detailed information, see the
Statement of Additional Information or consult your tax adviser.
Service Plan
Nuveen serves as the selling agent and distributor of the fund's shares. In this
capacity, Nuveen manages the offering of the fund's shares and is responsible
for all sales and promotional activities, and for providing certain services to
shareholders. The fund has adopted a service plan in accordance with Rule 12b-1
under the Investment Company Act of 1940 to reimburse Nuveen for these services.
The service fee payable under the plan is .25% of the average daily net assets
of serviced accounts. Nuveen uses this fee to compensate authorized dealers,
including Nuveen, for providing on-going account services to shareholders. These
services may include establishing and maintaining your account, answering your
questions and providing other personal services to you. Because these fees are
paid out of the fund's assets on an on-going basis, over time these fees will
increase the cost of your investment. Nuveen may, in its discretion and from its
own resources, pay certain financial service firms additional amounts for
services rendered to shareholders.
Section 4 General Information 13
<PAGE>
Net Asset Value
The price you pay and receive for your shares is based on the fund's net asset
value per share, which is determined at 12:00 noon Eastern Time on each business
day. Because the fund seeks to maintain a constant price per share of $1.00, the
fund values its portfolio securities using the amortized cost method, which
approximates market value and is described in more detail in the Statement of
Additional Information. There can be no assurance that the fund will be able to
maintain a constant price per share of $1.00.
Fund Service Providers
The custodian of the fund's assets is The Chase Manhattan Bank, 4 New York
Plaza, New York, NY 10004-2413. Chase also provides certain accounting services
to the fund. The fund's transfer, shareholder services and dividend paying
agent, Chase Global Funds Services Company, P.O. Box 5186, New York, NY 10274-
5186, performs bookkeeping, data processing and administrative services for the
maintenance of shareholder accounts.
Year 2000
The fund's service providers rely on computer systems to manage the fund's
investments, process shareholder transactions and provide shareholder account
maintenance. Because of the way computers historically have stored dates, some
of these systems currently may not be able to correctly process activity
occurring in the year 2000. Nuveen is working with the fund's service providers
to adapt their systems to address this issue. Nuveen and the fund expect that
the necessary work will be completed on a timely basis, although there can be no
assurance of this.
14 Section 4 General Information
<PAGE>
Section 5 Financial Highlights
Section 5 Financial Highlights 15
<PAGE>
Appendix Additional State Information
Because the fund invests primarily in New York tax-exempt investments, it is
more vulnerable than more geographically diversified tax-exempt funds to the New
York economy and issues encountered by tax exempt issuers in New York such as
the inability or perceived inability of the state or local municipality (or
their agencies or instrumentalities) to collect sufficient tax or other revenues
to meet their payment obligations, the placement of constitutional or statutory
limits on a tax-exempt issuer's ability to raise revenues or increase taxes, and
economic or demographic factors that may cause a decrease in tax or other
revenues for the state or local municipality (or their agencies or
instrumentalities), or for the private operators of publicly financed
facilities.
These factors, among others, may affect tax-exempt issuers' abilities to pay
their obligations when due and may adversely impact the fund and its
shareholders.
The State of New York experienced economic recessions during the late
1980's/early 1990's, and the credit ratings assigned to New York's general
obligation bonds were reduced by at least one rating agency since 1990. In
addition, the State of New York and many of its agencies and local governments
have been experiencing, and continue to experience, significant financial
difficulties. The State of New York may experience financial difficulties in the
future, which could lead to reductions in New York's credit standing and
possibly the credit standing of certain local governments (including New York
City).
<PAGE>
Nuveen Mutual Funds
Nuveen offers a variety of mutual funds designed to help you reach your
financial goals. The funds below are grouped by investment objectives.
Growth
Nuveen Rittenhouse Growth Fund
Growth and Income
Growth and Income Stock Fund
Balanced Stock and Bond Fund
Balanced Municipal and Stock Fund
Dividend and Growth Fund
European Value Fund
Income
Income Fund
Tax-Free Income
National Municipal Bond Funds
Long-term Intermediate-term
Insured Long-term Limited-term
State Municipal Bond Funds
Arizona Louisiana North Carolina
California/1/ Maryland Ohio
Colorado Massachusetts/1/ Pennsylvania
Connecticut Michigan Tennessee
Florida Missouri Virginia
Georgia New Jersey Wisconsin
Kansas New Mexico
Kentucky New York/1/
Cash Reserves
Money Market Fund
Municipal Money Market Fund
California Tax-Exempt Money Market Fund
New York Tax-Exempt Money Market Fund
Several additional sources of information are available to you. The Statement of
Additional Information, incorporated by reference into this prospectus, contains
detailed information on fund policies and operations. Shareholder reports
contain management's discussion of market conditions, investment strategies and
performance results as of the fund's latest semi-annual or annual fiscal year
end. Call Nuveen at (800) 257-8787 to request a free copy of any of these
materials or other fund information, or ask your financial adviser for copies.
You also may 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 (800) SEC-0330
for room hours and operation. You also may request fund information by writing
to the SEC's Public Reference Section, Washington, D.C. 20549. The fund's
Investment Company Act file number is 811-09267.
1. Long-term and insured long-term portfolios.
NUVEEN
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
(800) 257-8787
www.nuveen.com
<PAGE>
Statement of Additional Information
June 10, 1999
Nuveen Money Market Trust
333 West Wacker Drive
Chicago, Illinois 60606
Nuveen Money Market Trust
NUVEEN INSTITUTIONAL TAX-EXEMPT MONEY MARKET FUND
This Statement of Additional Information is not a prospectus. This Statement of
Additional Information should be read in conjunction with the Prospectus of the
Nuveen Institutional Tax-Exempt Money Market Fund dated June 10, 1999. The Pro-
spectus may be obtained without charge from certain securities representatives,
banks, and other financial institutions that have entered into sales agreements
with John Nuveen & Co. Incorporated, or from the Fund by mailing a written re-
quest to the Fund, c/o. John Nuveen & Co. Incorporated ("Nuveen"), 333 West
Wacker Drive, Chicago, Illinois 60606 or by calling (800) 257-8787.
<TABLE>
<S> <C>
Table of Contents Page
- ------------------------------------------------------------
Investment Policies and Investment Portfolio S-2
- ------------------------------------------------------------
Management S-11
- ------------------------------------------------------------
Investment Adviser and Investment Management Agreement S-15
- ------------------------------------------------------------
Portfolio Transactions S-16
- ------------------------------------------------------------
Net Asset Value S-17
- ------------------------------------------------------------
Tax Matters S-19
- ------------------------------------------------------------
Performance Information S-22
- ------------------------------------------------------------
Additional Information About Purchases and Sales S-24
- ------------------------------------------------------------
Other Information Regarding Shares of the Fund S-26
- ------------------------------------------------------------
</TABLE>
Principal Underwriter Investment Adviser Independent Public
John Nuveen & Co. Nuveen Advisory Corp., Accountants
Incorporated Subsidiary of for the Fund
John Nuveen & Co. Arthur Andersen LLP
Chicago: Incorporated 33 West Monroe Street
333 West Wacker Drive 333 West Wacker Drive Chicago, Illinois 60603
Chicago, Illinois 60606 Chicago, Illinois 60606
(312) 917-7700 Transfer and Dividend
Custodian Disbursing Agent Chase
Global Funds Services
Company
New York: The Chase Manhattan Bank
10 East 50th Street 4 New York Plaza
New York, New York 10022 New York, New York 10004 P.O. Box 5186
(212) 207-2000 New York, New York 10274
<PAGE>
INVESTMENT POLICIES AND INVESTMENT PORTFOLIO
Fundamental Policies
The Fund's investment objective and certain fundamental policies are described
in the Prospectus. The Fund, as a fundamental policy, may not:
(1) Invest in securities other than Municipal Obligations and temporary in-
vestments as those terms are defined in the Prospectus;
(2) Invest more than 5% of its total assets in securities of any one issuer,
excluding the United States government, its agencies and instrumentalities;
(3) Borrow money, except from banks for temporary or emergency purposes and
not for investment purposes and then only in an amount not exceeding (a) 10%
of the value of the Fund's total assets at the time of borrowing or (b) one-
third of the value of the Fund's total assets including the amount borrowed in
order to meet redemption requests which might otherwise require the untimely
disposition of securities. While any such borrowings are outstanding, no net
purchases of investment securities will be made by the Fund. If due to market
fluctuations or other reasons the value of the Fund's assets falls below 300%
of its borrowings, the Fund will reduce its borrowings within 3 business days.
To do this, the Fund may have to sell a portion of its investments at a time
when it may be disadvantageous to do so;
(4) Pledge, mortgage or hypothecate its assets, except that, to secure
borrowings permitted by subparagraph (3) above, it may pledge securities hav-
ing a market value at the time of pledge not exceeding 10% of the value of the
Fund's total assets;
(5) Issue senior securities as defined in the Investment Company Act of 1940
except to the extent such issuance might be involved with respect to
borrowings described under item (3) above;
(6) Underwrite any issue of securities, except to the extent that the purchase
of Municipal Obligations in accordance with the Fund's investment objective,
policies, and limitations, may be deemed to be an underwriting;
(7) Purchase or sell real estate, but this shall not prevent the Fund from in-
vesting in Municipal Obligations secured by real estate or interests therein;
(8) Purchase or sell commodities or commodities contracts or oil, gas or other
mineral exploration or development programs;
(9) Make loans, other than by entering into repurchase agreements and through
the purchase of Municipal Obligations or temporary investments in accordance
with its investment objective, policies and limitations;
(10) Make short sales of securities or purchase any securities on margin, ex-
cept for such short term credits as are necessary for the clearance of trans-
actions;
S-2
<PAGE>
(11) Invest more than 25% of its assets in the securities of issuers in any
single industry; provided, however, that such limitations shall not be applica-
ble to the purchase of Municipal Obligations and obligations issued or guaran-
teed by the U.S. government, its agencies or instrumentalities;
For the purpose of applying the limitations set forth in paragraph (2) above,
an issuer shall be deemed a separate issuer when its assets and revenues are
separate from other governmental entities and its securities are backed only by
its assets and revenues. Similarly, in the case of a non-governmental user,
such as an industrial corporation or a privately owned or operated hospital, if
the security is backed only by the assets and revenues of the non-governmental
user then such non-governmental user would be deemed to be the sole issuer.
Where a security is also backed by the enforceable obligations of a superior or
unrelated governmental entity or other entity it shall be included in the com-
putation of securities owned that are issued by such governmental entity or
other entity.
Where a security is guaranteed by a governmental entity or some other facility,
such as a bank guarantee or letter of credit, such a guarantee or letter of
credit would be considered a separate security and would be treated as an issue
of such government, other entity or bank. Where a security is insured by bond
insurance, it shall not be considered a security issued or guaranteed by the
insurer; instead the issuer of such security will be determined in accordance
with the principles set forth above. The foregoing restrictions do not limit
the percentage of the Fund's assets that may be invested in securities insured
by any single insurer. It is a fundamental policy of the Fund, which cannot be
changed without the approval of the holders of a majority of shares of such
Fund, that the Fund will not hold securities of a single bank, including secu-
rities backed by a letter of credit of such bank, if such holdings would exceed
10% of the total assets of the Fund.
The foregoing restrictions and limitations, as well as the Fund's policies as
to ratings of fund investments, will apply only at the time of purchase of se-
curities, and the percentage limitations will not be considered violated unless
an excess or deficiency occurs or exists immediately after and as a result of
an acquisition of securities, unless otherwise indicated.
The foregoing fundamental investment policies, together with the investment ob-
jective of the Fund, cannot be changed without approval by holders of a "major-
ity of the Fund's outstanding voting shares." As defined in the Investment Com-
pany Act of 1940, this means the vote of (i) 67% or more of the Fund's shares
present at a meeting, if the holders of more than 50% of the Fund's shares are
present or represented by proxy, or (ii) more than 50% of the Fund's shares,
whichever is less.
General Information
The Nuveen Money Market Trust (the "Trust") is an open-end management series
investment company organized as a Massachusetts business trust on January 15,
1999. The Fund is an open-end, diversified management investment company orga-
nized as a series of the Trust. The Trust is an open-end management series com-
pany under SEC Rule 18f-2. The Fund (formerly, the Nuveen Tax-Exempt Money Mar-
ket Fund, Inc., the Fund's predecessor) is a separate series issuing its own
shares. The Trust currently has five series. Certain matters under the Invest-
ment Company Act of 1940 which must be submitted to a vote of the holders of
the outstanding voting securities of a series company shall not be
S-3
<PAGE>
deemed to have been effectively acted upon unless approved by the holders of a
majority of the outstanding voting securities of each series affected by such
matter.
The Trust is an entity of the type commonly known as a "Massachusetts business
trust." Under Massachusetts law, shareholders of a trust may, under certain
circumstances, be held personally liable as partners for its obligations. How-
ever, the Declaration of Trust contains an express disclaimer of shareholder
liability for acts or obligations of the Trust and requires that notice of this
disclaimer be given in each agreement, obligation or instrument entered into or
executed by the Trust or the Trustees. The Declaration of Trust further pro-
vides for indemnification out of the assets and property of the Trust for all
loss and expense of any shareholder personally liable for the obligations of
the Trust. Thus, the risk of a shareholder incurring financial loss on account
of shareholder liability is limited to circumstances in which both inadequate
insurance existed and the Trust itself were unable to meet its obligations. The
Trust believes the likelihood of these circumstances is remote.
Fund Shares represent an interest in the same portfolio of investments of the
Fund. Fund Shares have equal rights as to voting, redemption, dividends and
liquidaton, and have exclusive voting rights with respect to any applicable
distribution or service plan. There are no conversion, preemptive or other sub-
scription rights. The Board of Trustees of the Fund have the right to establish
additional series and classes of shares in the future, to change those series
or classes and to determine the preferences, voting powers, rights and privi-
leges thereof.
Year 2000 Issues
The "Year 2000" problem refers to the fact that many computer programs use only
the last two digits of a year, and do not recognize a year that begins with
"20" instead of "19." If this problem is not corrected, computers could func-
tion improperly or not at all, which could affect the global economy. The SEC
has urged securities issuers to disclose the steps they are taking to correct
any Year 2000 problems.
The Fund invests primarily in money market instruments. If the issuers of these
instruments do not correct any Year 2000 problems in a timely manner, they
could experience problems in conducting their operations or in making payments
on their securities, which could cause the value of these securities to de-
cline. Issuers could experience three types of Year 2000 problems. First, if an
issuer's internal computer systems experience Year 2000 problems, this could
disrupt an issuer's operations (such as its ability to collect local taxes or
fees). Second, an issuer may rely on other parties for the payments that sup-
port its debt service, such as servicers that collect mortgage or student loan
payments, and those third parties may have Year 2000 problems that interfere
with their ability to forward payments to the issuer. Third, an issuer may have
mechanical problems in sending payments to its securities holders.
Nuveen Advisory is obtaining information about the Year 2000 readiness of the
issuers of its portfolio securities as part of its on-going surveillance of the
creditworthiness of those issuers.
S-4
<PAGE>
Portfolio Securities
The various securities in which the Fund intends to invest are described in the
Prospectus. The following is a more complete description of certain securities
in which the Fund may invest:
Municipal Obligations. The Fund invests in debt obligations issued by states,
cities and local authorities to obtain funds for various public purposes, in-
cluding the construction of such public facilities as airports, bridges, high-
ways, housing, hospitals, mass transportation, schools, streets and water and
sewer works. Other public purposes for which these securities may be issued in-
clude the refinancing of outstanding obligations, the obtaining of funds for
general operating expenses and for loans to other public institutions and fa-
cilities. In addition, the Fund may invest in certain industrial development
bonds and pollution control bonds.
Two principal classifications of these securities (some called Municipal Obli-
gations) are "general obligation" and "revenue" bonds. General obligation bonds
are secured by the issuer's pledge of its full faith, credit and taxing power
for the payment of principal and interest. Revenue bonds are payable only from
the revenues derived from a particular facility or class of facilities or, in
some cases, from the proceeds of a special excise or other specific revenue
source. Industrial development and pollution control bonds are in most cases
revenue bonds and do not generally constitute the pledge of the credit or tax-
ing power of the issuer of such bonds.
Municipal Obligations can be further classified between bonds and notes. Bonds
are issued to raise longer-term capital but, when purchased by the Fund, will
have 397 days or less remaining until maturity or will have a variable or
floating rate of interest. These issues may be either general obligation bonds
or revenue bonds.
Notes are short-term instruments with a maturity of two years or less. Most
notes are general obligations of the issuer and are sold in anticipation of a
bond sale, collection of taxes or receipt of other revenues. Payment of these
notes is primarily dependent upon the issuer's receipt of the anticipated reve-
nues.
Municipal Obligations also include very short-term unsecured, negotiable prom-
issory notes, issued by states, municipalities, and their agencies, which are
known as "tax-exempt commercial paper" or "municipal paper." Payment of princi-
pal and interest on issues of municipal paper may be made from various sources,
to the extent that funds are available therefrom. There is a limited secondary
market for issues of municipal paper.
While these various types of notes as a group represent the major portion of
the tax-exempt note market, other types of notes are occasionally available in
the marketplace and the Fund may invest in such other types of notes to the ex-
tent consistent with its investment objective and limitations. Such notes may
be issued for different purposes and with different security than those men-
tioned above.
The yields on Municipal Obligations are dependent on a variety of factors, in-
cluding the condition of the general money market and the Municipal Obligation
market, the size of a particular offering, the maturity of the obligation and
the rating of the issue. Consequently, Municipal Obligations with the
S-5
<PAGE>
same maturity, coupon and rating may have different yields while obligations of
the same maturity and coupon with different ratings may have the same yield.
The market value of outstanding Municipal Obligations will vary with changes in
prevailing interest rate levels and as a result of changing evaluations of the
ability of their issuers to meet interest and principal payments.
Obligations of issuers of debt securities are subject to the provisions of
bankruptcy, insolvency, and other laws affecting the rights and remedies of
creditors. In addition, the obligations of such issuers may become subject to
laws enacted in the future by Congress, state legislatures or referenda ex-
tending the time for payment of principal and/or interest, or imposing other
constraints upon enforcement of such obligations or upon municipalities to levy
taxes. There is also the possibility that, as a result of legislation or other
conditions, the power or ability of any issuer to pay, when due, the principal
of and interest on its debt securities may be materially affected.
Bond Anticipation Notes (BANs) are usually general obligations of state and lo-
cal governmental issuers which are sold to obtain interim financing for pro-
jects that will eventually be funded through the sale of long-term debt obliga-
tions or bonds. The ability of an issuer to meet its obligations on its BANs is
primarily dependent on the issuer's access to the long-term municipal bond mar-
ket and the likelihood that the proceeds of such bond sales will be used to pay
the principal and interest on the BANs.
Tax Anticipation Notes (TANs) are issued by state and local governments to fi-
nance the current operations of such governments. Repayment is generally to be
derived from specific future tax revenues. TANs are usually general obligations
of the issuer. A weakness in an issuer's capacity to raise taxes due to, among
other things, a decline in its tax base or a rise in delinquencies, could ad-
versely affect the issuer's ability to meet its obligations on outstanding
TANs.
Revenue Anticipation Notes (RANs) are issued by governments or governmental
bodies with the expectation that future revenues from a designated source will
be used to repay the notes. In general they also constitute general obligations
of the issuer. A decline in the receipt of projected revenues, such as antici-
pated revenues from another level of government, could adversely affect an is-
suer's ability to meet its obligations on outstanding RANs. In addition, the
possibility that the revenues would, when received, be used to meet other obli-
gations could affect the ability of the issuer to pay the principal and inter-
est on RANs.
Construction Loan Notes are issued to provide construction financing for spe-
cific projects. Frequently, these notes are redeemed with funds obtained from
the Federal Housing Administration.
Bank Notes are notes issued by local governmental bodies and agencies as those
described above to commercial banks as evidence of borrowings. The purposes for
which the notes are issued are varied but they are frequently issued to meet
short-term working capital or capital-project needs. These notes may have risks
similar to the risks associated with TANs and RANs.
Industrial Development Bonds (IDBs) and Pollution Control Bonds (PCBs) are is-
sued by or on behalf of public authorities to finance various privately-rated
facilities. Typically the interest paid on these bonds
S-6
<PAGE>
is included within the term municipal obligation if the interest paid thereon
is exempt from federal income tax.
Variable and Floating Rate Instruments--Certain money market instruments may
carry variable or floating rates of interest. Such instruments bear interest at
rates which are not fixed, but which vary with changes in specified market
rates or indices, such as a bank prime rate or tax-exempt money market index.
Variable rate notes are adjusted to current interest rate levels at certain
specified times, such as every 30 days, as set forth in the instrument. A
floating rate note adjusts automatically whenever there is a change in its base
interest rate adjustor, e.g., a change in the prime lending rate or specified
interest rate indices. Typically such instruments carry demand features permit-
ting the Fund to recover the full principal amount thereof upon specified no-
tice.
One form of variable or floating rate instrument consists of an underlying
fixed rate municipal bond that is subject to a third party demand feature or
"tender option." The holder of the bond would pay a "tender fee" to the third
party tender option provider, the amount of which would be periodically ad-
justed so that the bond/tender option combination would reasonably be expected
to have a market value that approximates the par value of the bond. The
bond/tender option combination would therefore be functionally equivalent to
ordinary variable or floating rate obligations as described above, and the Fund
may purchase such obligation subject to certain conditions specified by the Se-
curities and Exchange Commission.
The Fund's right to obtain payment at par on a demand instrument upon demand
could be adversely affected by events occurring between the date the Fund
elects to tender the instrument and the date proceeds are due. Nuveen Advisory
will monitor on an ongoing basis the pricing, quality and liquidity of such in-
struments and will similarly monitor the ability of an obligor under the demand
arrangement, including demand obligors as to instruments supported by bank let-
ters of credit or guarantees, to pay principal and interest on demand. Although
the ultimate maturity of such variable rate obligations may exceed one year,
the Fund will treat the maturity of each variable rate demand obligation, for
purposes of computing its dollar-weighted average portfolio maturity, as the
longer of (i) the notice period required before the Fund is entitled to payment
of the principal amount through demand, or (ii) the period remaining until the
next interest rate adjustment.
The Fund may also obtain standby commitments with respect to Municipal Obliga-
tions. Under a standby commitment (often referred to as a put), the party issu-
ing the commitment agrees to purchase at the Fund's option the Municipal Obli-
gation at an agreed-upon price on certain dates or within a specific period.
Since the value of a standby commitment depends in part upon the ability of the
issuing party to meet its purchase obligations thereunder, the Fund will enter
into standby commitments only with parties which have been evaluated by Nuveen
Advisory and, in the opinion of Nuveen Advisory, present minimal credit risks.
The amount payable to the Fund upon its exercise of a standby commitment would
be (1) the acquisition cost of the Municipal Obligations (excluding any accrued
interest that the Fund paid on acquisition), less any amortized market premium
or plus any amortized market or original issue discount during the period the
Fund owned the security, plus (2) all interest accrued on the security since
the
S-7
<PAGE>
last interest payment date during the period the security was owned by the
Fund. The Fund's right to exercise standby commitments held by it will be un-
conditional and unqualified. The acquisition of a standby commitment will not
affect the valuation of the underlying security, which will continue to be val-
ued in accordance with the amortized cost method. The standby commitment itself
will be valued at zero in determining net asset value. The Fund may purchase
standby commitments for cash or pay a higher price for portfolio securities
which are acquired subject to such a commitment (thus reducing the yield to ma-
turity otherwise available for the same securities). The maturity of a Munici-
pal Obligation purchased by the Fund will not be considered shortened by any
standby commitment to which such security is subject. Although the Fund's
rights under a standby commitment would not be transferable, the Fund could
sell Municipal Obligations which were subject to a standby commitment to a
third party at any time.
When-Issued Securities--The Fund may purchase and sell Municipal Obligations on
a when-issued or delayed delivery basis. When-issued and delayed delivery
transactions arise when securities are purchased or sold with payment and de-
livery beyond the regular settlement date. (When-issued transactions normally
settle within 30-45 days.) On such transactions the payment obligation and the
interest rate are fixed at the time the buyer enters into the commitment. The
commitment to purchase securities on a when-issued or delayed delivery basis
may involve an element of risk because the value of the securities is subject
to market fluctuation, no interest accrues to the purchaser prior to settlement
of the transaction, and at the time of delivery the market value may be less
than cost. At the time the Fund makes the commitment to purchase a Municipal
Obligation on a when-issued or delayed delivery basis, it will record the
transaction and reflect the amount due and the value of the security in deter-
mining its net asset value. Likewise, at the time the Fund makes the commitment
to sell a Municipal Obligation on a delayed delivery basis, it will record the
transaction and include the proceeds to be received in determining its net as-
set value; accordingly, any fluctuations in the value of the Municipal Obliga-
tion sold pursuant to a delayed delivery commitment are ignored in calculating
net asset value so long as the commitment remains in effect. The Fund will
maintain designated readily marketable assets at least equal in value to com-
mitments to purchase when-issued or delayed delivery securities, such assets to
be segregated by the Custodian specifically for the settlement of such commit-
ments. The Fund will only make commitments to purchase Municipal Obligations on
a when-issued or delayed delivery basis with the intention of actually acquir-
ing the securities, but the Fund reserves the right to sell these securities
before the settlement date if it is deemed advisable. If a when-issued security
is sold before delivery any gain or loss would not be tax-exempt.
Taxable Investments
Taxable investments (sometimes called "Temporary Investments") include obliga-
tions of the United States Government, its agencies or instrumentalities; debt
securities of issuers having, at the time of purchase, a quality rating within
the two highest grades by either Moody's Investors Service, Inc. ("Moody's") or
Standard & Poor's Corporation ("S&P") (Aaa or Aa, or AAA or AA, respectively);
commercial paper rated in the highest grade by either of such rating services
(Prime-1 or A-1, respectively); certificates of deposit of domestic banks with
assets of $1 billion or more; and Municipal Obligations and U.S. government ob-
ligations subject to short-term repurchase agreements.
S-8
<PAGE>
Subject to the limitations described in the Prospectus, the Fund may invest in
the following taxable investments:
U.S. Government Direct Obligations are issued by the United States Treasury and
include bills, notes, and bonds.
- --Treasury bills are issued with maturities of up to one year. They are issued
in bearer form, are sold on a discount basis and are payable at par value at
maturity.
- --Treasury notes are longer-term interest-bearing obligations with original ma-
turities of one to seven years.
- --Treasury bonds are longer-term interest-bearing obligations with original ma-
turities of five to thirty years.
U.S. Government Agencies Securities--Certain federal agencies have been estab-
lished as instrumentalities of the United States government to supervise and
finance certain types of activities. These agencies include, but are not lim-
ited to, the Bank for Cooperatives, Federal Land Banks, Federal Intermediate
Credit Banks, Federal Home Loan Banks, Federal National Mortgage Association,
Government National Mortgage Association, Export-Import Bank of the United
States and Tennessee Valley Authority. Issues of these agencies, while not di-
rect obligations of the United States government, are either backed by the full
faith and credit of the United States or are guaranteed by the Treasury or sup-
ported by the issuing agencies' right to borrow from the Treasury. There can be
no assurance that the United States government itself will pay interest and
principal on securities as to which it is not so legally obligated.
Certificates of Deposit (CDs)--A certificate of deposit is a negotiable inter-
est-bearing instrument with a specific maturity. CDs are issued by banks in ex-
change for the deposit of funds and normally can be traded in the secondary
market, prior to maturity. The Fund will only invest in U.S. dollar denominated
CDs issued by U.S. banks with assets of $1 billion or more.
Commercial Paper--Commercial paper is the term used to designate unsecured
short-term promissory notes issued by corporations. Maturities on these issues
vary from a few to 397 days. Commercial paper may be purchased from U.S. corpo-
rations.
Other Corporate Obligations--The Fund may purchase notes, bonds and debentures
issued by corporations if at the time of purchase there is less than 397 days
remaining until maturity or if they carry a variable or floating rate of inter-
est.
Repurchase Agreements--A repurchase agreement is a contractual agreement
whereby the seller of securities (U.S. government or Municipal Obligations)
agrees to repurchase the same security at a specified price on a future date
agreed upon by the parties. The agreed upon repurchase price determines the
yield during the Fund's holding period. Repurchase agreements are considered to
be loans collateralized by the underlying security that is the subject of the
repurchase contract. The Fund will only enter into repurchase agreements with
dealers, domestic banks or recognized financial institutions that in the opin-
ion of Nuveen Advisory represent minimal credit risk. The risk to the Fund is
limited to the ability of the issuer to pay the agreed upon repurchase price on
the delivery date; however, although the value of
S-9
<PAGE>
the underlying collateral at the time the transaction is entered into always
equals or exceeds the agreed upon repurchase price, if the value of the collat-
eral declines, there is a risk of loss of both principal and interest. In the
event of default, the collateral may be sold but the Fund might incur a loss if
the value of the collateral declines, and might incur disposition costs or ex-
perience delays in connection with liquidating the collateral. In addition, if
bankruptcy proceedings are commenced with respect to the seller of the securi-
ty, realization upon the collateral by the Fund may be delayed or limited.
Nuveen Advisory will monitor the value of the collateral at the time the trans-
action is entered into and at all times subsequent during the term of the re-
purchase agreement in an effort to determine that the value always equals or
exceeds the agreed upon repurchase price. In the event the value of the collat-
eral declines below the repurchase price, Nuveen Advisory will demand addi-
tional collateral from the issuer to increase the value of the collateral to at
least that of the repurchase price.
Ratings of Investments
The two highest ratings of Moody's for municipal securities are Aaa and Aa. Mu-
nicipal securities rated Aaa are judged to be of the "best quality." The rating
of Aa is assigned to municipal securities which are of "high quality by all
standards," but as to which margins of protection or other elements make long-
term risks appear somewhat larger than in Aaa rated municipal securities. The
Aaa and Aa rated municipal securities comprise what are generally known as
"high grade bonds." Moody's bond rating symbols may contain numerical modifiers
of a generic rating classification. The modifier 1 indicates that the bond
ranks at the high end of its category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates that the issue ranks in the lower end of
its generic rating category.
The two highest ratings of S&P for municipal securities are AAA and AA. Munici-
pal securities rated AAA have an extremely strong capacity to pay principal and
interest. The rating of AA indicates that capacity to pay principal and inter-
est is very strong and such bonds differ from AAA issues only in small degree.
The highest rating of Moody's and S&P for federally tax-exempt short-term loans
and notes is VMIG-1 or MIG-1 and SP-1, respectively. Obligations designated
VMIG-1 and MIG-1 are the best quality, enjoying strong protection from estab-
lished cash flows for their servicing or from established and broad-based ac-
cess to the market for refinancing, or both. The designation SP-1 indicates a
very strong or strong capacity to pay principal and interest.
The Fund's ability to purchase commercial paper of tax-exempt and corporate is-
suers is limited to commercial paper rated Prime-1 by Moody's or A-1 by S&P.
The rating Prime-1 (P-1) is the highest commercial paper rating assigned by
Moody's. Issuers rated P-1 have a superior capacity for repayment of short-term
obligations normally evidenced by the following characteristics: leading market
positions in well-established industries; high rates of return on funds em-
ployed; conservative capitalization structures with moderate reliance on debt
and ample asset protection; broad margins in earnings coverage of fixed finan-
cial charges and high internal cash generation; well-established access to a
range of financial markets and assured sources of alternative liquidity. The
designation A-1 indicates that the degree of safety regarding timely payment is
very strong.
S-10
<PAGE>
Subsequent to its purchase by the Fund, an issue may cease to be rated or its
rating may be reduced below the minimum required for purchase by the Fund. Nei-
ther event requires the elimination of such obligations from the Fund, but
Nuveen Advisory will consider such an event in its determination of whether the
Fund should continue to hold such obligation.
MANAGEMENT
The management of the Trust, including general supervision of the duties per-
formed by Nuveen Advisory under the Investment Management Agreement, is the re-
sponsibility of its Board of Trustees. There are seven trustees of the Trust,
one of whom is an "interested person" (as that term is defined in the Invest-
ment Company Act of 1940). None of the trustees who are not "interested per-
sons" of the Fund has ever been a director or employee of, or consultant to,
Nuveen or its affiliates. The names and business addresses of the trustees and
officers of the Trust and their ages and their principal occupations and other
affiliations during the past five years are set forth below.
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
Positions and Principal Occupation
Name and Address Age Offices with Fund During Past Five Years
- -------------------------------------------------------------------------------
<C> <C> <C> <S>
Timothy R. Schwertfeger*+ 50 Chairman and Trustee Chairman of the Board of
333 West Wacker Drive the Funds (since July
Chicago, IL 60606 1996); Trustee and
President of the Funds
advised by Nuveen
Institutional Advisory
Corp. (since July 1996);
Chairman (since July
1996), Director, and
previously Executive
Vice President, of The
John Nuveen Company,
John Nuveen & Co.,
Nuveen Advisory Corp.
and Nuveen Institutional
Advisory Corp.; Director
(since 1996) of
Institutional Capital
Corporation; Chairman
and Director of Nuveen
Asset Management, Inc.;
Chairman and Director of
Rittenhouse Financial
Services Inc. (since
1999).
- -------------------------------------------------------------------------------
Robert P. Bremner 58 Trustee Private Investor and
3725 Huntington Street, N.W. Management Consultant.
Washington, D.C. 20015
- -------------------------------------------------------------------------------
Lawrence H. Brown 64 Trustee Retired (August 1989) as
201 Michigan Avenue Senior Vice President of
Highwood, IL 60040 The Northern Trust
Company (banking and
trust industry).
- -------------------------------------------------------------------------------
Anne E. Impellizzeri 66 Trustee Executive Director
3 West 29th Street (since 1998) of Manitoga
New York, NY 10001 (center for Russell
Wright's design/home and
landscape); formerly
President and Chief
Executive Officer of
Blanton-Peale,
Institutes of Religion
and Health (a training
and counseling
organization).
</TABLE>
- --------------------------------------------------------------------------------
S-11
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------
<CAPTION>
Principal Occupations
Name and Address Age Positions and Offices with Fund During Past Five Years
- ------------------------------------------------------------------------------------------
<C> <C> <C> <S>
Peter R. Sawers 66 Trustee Adjunct Professor of
22 The Landmark Business and Economics,
Northfield, IL 60093 University of Dubuque,
Iowa; Adjunct Professor,
Lake Forest Graduate
School of Management,
Lake Forest, Illinois;
Chartered Financial
Analyst; Certified
Management Consultant.
- ------------------------------------------------------------------------------------------
William J. Schneider 54 Trustee Senior Partner and Chief
4000 Miller-Valentine Ct. Operating Officer,
P.O. Box 744 Miller-Valentine
Dayton, OH 45401 Partners, Vice
President, Miller-
Valentine Group
(commercial real
estate); Member
Community Advisory
Board, National City
Bank, Dayton, Ohio.
- ------------------------------------------------------------------------------------------
Judith M. Stockdale 51 Trustee Executive Director,
35 E. Wacker Drive Gaylord and Dorothy
Suite 2600 Donnelley Foundation, a
Chicago, IL 60601 private family
foundation (since 1994);
prior thereto, Executive
Director, Great Lakes
Protection Fund (from
1990 to 1994).
- --------------------------------------------------------------------------------
Alan G. Berkshire+ 38 Vice President and Asst. Secretary Vice President and
333 West Wacker Drive since 1998 General Counsel (since
Chicago, IL 60606 September 1997) and
Secretary (since May
1998) of The John Nuveen
Company, John Nuveen &
Co. Incorporated, Nuveen
Advisory Corp. and
Nuveen Institutional
Advisory Corp.; prior
thereto, partner in the
law firm of Kirkland &
Ellis.
- --------------------------------------------------------------------------------
Peter H. D'Arrigo 31 Vice President and Treasurer Vice President of John
333 West Wacker Drive since 1999 Nuveen & Co.
Chicago, IL 60606 Incorporated (since
January 1999), prior
thereto. Assistant Vice
President (from January
1997); formerly,
Associate of John Nuveen
& Co. Incorporated;
Chartered Financial
Analyst.
- --------------------------------------------------------------------------------
Michael S. Davern+ 41 Vice President since 1997 Vice President of Nuveen
333 West Wacker Drive Advisory Corp. (since
Chicago, IL 60606 January 1997); prior
thereto, Vice President
and Portfolio Manager of
Flagship Financial, Inc.
(from September 1991 to
January 1997).
- ------------------------------------------------------------------------------------------
Lorna C. Ferguson+ 53 Vice President since 1998 Vice President of John
333 West Wacker Drive Nuveen & Co.
Chicago, IL 60606 Incorporated; Vice
President of Nuveen
Advisory Corp. and
Nuveen Institutional
Advisory Corp. (since
January 1998).
- ------------------------------------------------------------------------------------------
William M. Fitzgerald+ 35 Vice President since 1996 Vice President of Nuveen
333 West Wacker Drive Advisory Corp. (since
Chicago, IL 60606 December 1995); prior
thereto, Assistant Vice
President of
Nuveen Advisory Corp.
(from September 1992 to
December 1995);
Chartered Financial
Analyst.
- ------------------------------------------------------------------------------------------
Stephen D. Foy+ 44 Vice President and Controller Vice President of John
333 West Wacker Drive since 1998 Nuveen & Co.
Chicago, IL 60606 Incorporated and (since
May 1998) The John
Nuveen Company;
Certified Public
Accountant.
- --------------------------------------------------------------------------------
J. Thomas Futrell+ 43 Vice President since 1991 Vice President of Nuveen
333 West Wacker Drive Advisory Corp.;
Chicago, IL 60606 Chartered Financial
Analyst.
</TABLE>
- --------------------------------------------------------------------------------
S-12
<PAGE>
<TABLE>
- -----------------------------------------------------------------------------------
<CAPTION>
Positions and Principal Occupations
Name and Address Age Offices with Fund During Past Five Years
- -----------------------------------------------------------------------------------
<C> <C> <C> <S>
Richard A. Huber+ 36 Vice President since 1997 Vice President of Nuveen
333 West Wacker Drive Institutional Advisory
Chicago, IL 60606 Corp. (since March 1998)
and Nuveen Advisory
Corp. (since January
1997); prior thereto,
Vice President and
Portfolio Manager of
Flagship Financial, Inc.
- -----------------------------------------------------------------------------------
Steven J. Krupa+ 41 Vice President since 1990 Vice President of Nuveen
333 West Wacker Drive Advisory Corp.
Chicago, IL 60606
- -----------------------------------------------------------------------------------
Larry W. Martin+ 47 Vice President and Asst. Vice President,
333 West Wacker Drive Secretary since 1993 Assistant Secretary and
Chicago, IL 60606 Assistant General
Counsel of John Nuveen &
Co. Incorporated; Vice
President and Assistant
Secretary of Nuveen
Advisory Corp. and
Nuveen Institutional
Advisory Corp.,
Assistant Secretary of
The John Nuveen Company
and (since January 1997)
Nuveen Asset Management
Inc.
- -----------------------------------------------------------------------------------
Edward F. Neild, IV+ 33 Vice President since 1996 Vice President of Nuveen
333 West Wacker Drive Advisory Corp. and
Chicago, IL 60606 Nuveen Institutional
Advisory Corp. (since
September 1996); prior
thereto, Assistant Vice
President of Nuveen
Advisory Corp. (from
December 1993 to
September 1996) and
Nuveen Institutional
Advisory Corp. (from May
1995 to September 1996);
Chartered Financial
Analyst.
- -----------------------------------------------------------------------------------
Stephen S. Peterson+ 41 Vice President since 1997 Vice President, (since
333 West Wacker Drive September 1997).
Chicago, IL 60606 Assistant Vice President
(from September 1996 to
September 1997), and
Portfolio Manager prior
thereto, of Nuveen
Advisory Corp.;
Chartered Financial
Analyst.
- -----------------------------------------------------------------------------------
Stuart W. Rogers+ 43 Vice President since 1997 Vice President of John
333 West Wacker Drive Nuveen & Co.
Chicago, IL 60606 Incorporated.
- -----------------------------------------------------------------------------------
Thomas C. Spalding Jr.+ 47 Vice President since 1980 Vice President of Nuveen
333 West Wacker Drive Advisory Corp. and
Chicago, IL 60606 Nuveen Institutional
Advisory Corp.;
Chartered Financial
Analyst.
- -----------------------------------------------------------------------------------
William S. Swanson+ 33 Vice President since 1998 Vice President of John
333 West Wacker Drive Nuveen & Co.
Chicago, IL 60606 Incorporated (since
October 1997); Assistant
Vice President (from
September 1996 to
October 1997) and
formerly, Associate;
Chartered Financial
Analyst.
- -----------------------------------------------------------------------------------
Gifford R. Zimmerman+ 42 Vice President since 1993 and Vice President,
333 West Wacker Drive Secretary since 1998 Assistant Secretary and
Chicago, IL 60606 Associate General
Counsel, formerly
Assistant General
Counsel (since September
1997) of John Nuveen &
Co. Incorporated; Vice
President and Assistant
Secretary of Nuveen
Advisory Corp. and
Nuveen Institutional
Advisory Corp.;
Assistant Secretary of
The John Nuveen Company
(since May 1994);
Chartered Financial
Analyst.
</TABLE>
- --------------------------------------------------------------------------------
S-13
<PAGE>
- --------
* Mr. Schwertfeger is an interested person of the Fund.
+ Person is affiliated with the Fund and affiliated with the Fund's adviser or
principal underwriter.
Timothy R. Schwertfeger and Peter R. Sawers serve as members of the Executive
Committee of the Board of Trustees. The Executive Committee, which meets be-
tween regular meetings of the Board of Trustees, is authorized to exercise all
of the powers of the Board of Trustees provided that the scope of the powers of
the Executive Committee, unless otherwise specifically authorized by the full
Board,
shall be limited to (i) emergency matters where assembling the full Board in a
timely manner is impracticable (and in which event management would take all
reasonable steps to quickly notify the individual Board members of the actions
taken by the Executive Committee), or (ii) matters of an administrative or min-
isterial nature.
The trustees of the Trust, are directors, or trustees, as the case may be, of
36 Nuveen open-end portfolios and 55 Nuveen closed-end funds. Mr. Schwertfeger
is also trustee of 11 Nuveen open-end and closed-end funds advised by Nuveen
Institutional Advisory Corp.
The following table sets forth compensation paid by the Fund, as its predeces-
sor, during the fiscal year ended February 28, 1999, to each of the trustees.
The Fund has no retirement or pension plans. The officers and trustees affili-
ated with Nuveen serve without any compensation from the Fund.
<TABLE>
<CAPTION>
Total Compensation
from the Fund
Compensation and Fund Complex
Name of Trustee from the Fund Paid to Trustees
- --------------------------------------------------------------------------------
<S> <C> <C>
Robert P. Bremner.............................. $1,044 $71,500
Lawrence H. Brown.............................. $1,134 $79,000
Anne E. Impellizzeri........................... $1,044 $71,500
Peter R. Sawers................................ $1,044 $72,000
William J. Schneider........................... $1,044 $71,500
Judith M. Stockdale............................ $1,044 $72,000
</TABLE>
Each trustee who is not affiliated with Nuveen or Nuveen Advisory will receive
a fee. The Trust requires no employees other than its officers, all of whom are
compensated by Nuveen.
S-14
<PAGE>
INVESTMENT ADVISER AND INVESTMENT MANAGEMENT AGREEMENT
Nuveen Advisory acts as investment adviser for the Fund and in such capacity
manages the investment and reinvestment of the assets of the Fund. Nuveen Advi-
sory also administers the Trust's business affairs, provides office facilities
and equipment and certain clerical, bookkeeping and administrative services,
and permits any of its officers or employees to serve without compensation as
trustees or officers of the Trust if elected to such positions.
Pursuant to an investment management agreement between Nuveen Advisory and the
Trust, the Fund has agreed to pay annual management fees at the rates set forth
below, which are based on the Fund's average daily net asset value:
<TABLE>
<CAPTION>
Average Daily Management
Net Asset Value Fee
- --------------------------------------------------------------------------------
<S> <C>
First $125M........................................................ 0.4000 of 1%
Next $125M......................................................... 0.3875 of 1%
Next $250M......................................................... 0.3750 of 1%
Next $500M......................................................... 0.3625 of 1%
Next $1B........................................................... 0.3500 of 1%
Over $2B........................................................... 0.3250 of 1%
</TABLE>
Through December 31, 1999, Nuveen Advisory has undertaken to reimburse Fund ex-
penses in an amount necessary to limit total operating expenses to .45 of 1% of
the Fund's daily net asset value. Thereafter, Nuveen Advisory may chose to mod-
ify, continue or discontinue these reimbursements at its sole discretion.
Before June 1999 Nuveen Advisory's annual management fees were calculated at
the rates set forth below, which are based on the Fund's average daily net as-
set value:
<TABLE>
<CAPTION>
Average Daily Net Asset
Value Management Fees
- -------------------------------------------
<S> <C>
For the first $500 million .4000 of 1%
For the next $500 million .3750 of 1%
For assets over $1 billion .3500 of 1%
For assets over $2 billion .3250 of 1%
</TABLE>
For periods before June 1999, Nuveen Advisory had agreed to waive all or a por-
tion of its management fee or reimburse certain expenses of the Fund in order
to prevent total operating expenses of (including Nuveen Advisory's management
fee, but excluding interest, taxes, fees incurred in acquiring and disposing of
portfolio securities, any asset-based distribution or service fees and, to the
extent permitted, extraordinary expenses) in any fiscal year from exceeding .45
of 1% of the average daily net asset value of the Fund. Nuveen Advisory could
also voluntarily agree to reimburse additional expenses from time to time,
which could be terminated at any time in its discretion. For the last three
fiscal years, the Fund, as its predecessor, paid net management fees to Nuveen
Advisory as follows:
<TABLE>
<CAPTION>
Management Fees Net of
Expense Reimbursement Paid Fee Waivers and Expense
to Nuveen Advisory Reimbursements for the
for the Year Ended Year Ended
----------------------------------------------------
2/28/97 2/28/98 2/28/99 2/28/97 2/28/98 2/28/99
<S> <C> <C> <C> <C> <C>
----------------------------------------------------
2,136,925 1,993,848
</TABLE>
S-15
<PAGE>
Nuveen Advisory is a wholly-owned subsidiary of John Nuveen & Co. Incorporated
("Nuveen"), the Fund's principal underwriter. Nuveen and its affiliates have
sponsored or underwritten more than $60 billion of investment company securi-
ties. Over 1,300,000 individuals have invested to date in Nuveen's funds and
trusts. Founded in 1898, Nuveen is a subsidiary of The John Nuveen Company
which, in turn, is approximately 78% owned by The St. Paul Companies, Inc.
("St. Paul"). St. Paul is located in St. Paul, Minnesota, and is principally
engaged in providing property-liability insurance through subsidiaries.
Nuveen Advisory's portfolio managers call upon the resources of Nuveen's Re-
search Department. The Nuveen Research Department reviews more than $100 bil-
lion in municipal bonds every year.
The Fund, the other Nuveen funds, Nuveen Advisory, and other related entities
have adopted a code of ethics which essentially prohibits all Nuveen fund man-
agement personnel, including Nuveen fund portfolio managers, from engaging in
personal investments which compete or interfere with, or attempt to take advan-
tage of, the Fund's anticipated or actual portfolio transactions, and is de-
signed to assure that the interest of Fund shareholders is placed before the
interest of Nuveen personnel in connection with personal investment transac-
tions.
PORTFOLIO TRANSACTIONS
Nuveen Advisory, in effecting purchases and sales of portfolio securities for
the account of the Fund, will place orders in such manner as, in the opinion of
management, will offer the best price and market for the execution of each
transaction. Portfolio securities will normally be purchased directly from an
underwriter or in the over-the-counter market from the principal dealers in
such securities, unless it appears that a better price or execution may be ob-
tained elsewhere. Portfolio securities will not be purchased from Nuveen or its
affiliates except in compliance with the Investment Company Act of 1940.
The Fund since its inception has effected all portfolio transactions on a prin-
cipal (as opposed to an agency) basis and, accordingly, has not paid any bro-
kerage commissions.
Purchases from underwriters include a commission or concession paid by the is-
suer to the underwriter, and purchases from dealers include the spread between
the bid and asked price. Given the best price and execution obtainable, it is
the practice of the Fund to select dealers which, in addition, furnish research
information (primarily credit analyses of issuers) and statistical and other
services to Nuveen Advisory. It is not possible to place a dollar value on in-
formation and statistical and other services received from dealers. Since it is
only supplementary to Nuveen Advisory's own research efforts, the receipt of
research information is not expected to reduce significantly Nuveen Advisory's
expenses. Any research benefits obtained are available to all Nuveen Advisory's
other clients. While Nuveen Advisory will be primarily responsible for the
placement of the Fund's business, the policies and practices of Nuveen Advisory
in this regard must be consistent with the foregoing and will, at all times, be
subject to review by the Board of Trustees of the Fund.
S-16
<PAGE>
Nuveen Advisory reserves the right to, and does, manage other investment ac-
counts and investment companies for other clients which may have investment ob-
jectives similar to the Fund. Subject to applicable laws and regulations,
Nuveen Advisory will attempt to allocate equitably portfolio transactions among
the Fund and the portfolios of its other clients purchasing securities whenever
decisions are made to purchase or sell securities by the Fund and one or more
of such other clients simultaneously. In making such allocations the main fac-
tors to be considered will be the respective investment objectives of the Fund
and such other clients, the relative size of portfolio holdings of the same or
comparable securities, the availability of cash for investment by the Fund and
such other clients, the size of investment commitments generally held by the
Fund and such other clients and opinions of the persons responsible for recom-
mending investments to the Fund and such other clients.
While this procedure could have a detrimental effect on the price or amount of
the securities available to the Fund from time to time, it is the opinion of
the Fund's Board of Trustees that the benefits available from Nuveen Advisory's
organization will outweigh any disadvantage that may arise from exposure to si-
multaneous transactions.
Under the Investment Company Act of 1940, the Fund may not purchase portfolio
securities from any underwriting syndicate of which Nuveen is a member except
under certain limited conditions set forth in Rule 10f-3. The Rule sets forth
requirements relating to, among other things, the type of securities purchased
by the Fund and the amount of securities which may be purchased in any one is-
sue. In addition, purchases of securities made pursuant to the terms of the
Rule must be approved at least quarterly by the Board of Trustees of the Fund,
including a majority of the members thereof who are not interested persons of
the Fund.
NET ASSET VALUE
As stated in the Prospectus, the net asset value of the shares of the Fund will
be determined by The Chase Manhattan Bank, the Fund's custodian, as of 12:00
noon, Eastern Time, (1) on each day on which the Federal Reserve Bank of Boston
is normally open and (2) on any day during which there is sufficient degree of
trading in the Fund's portfolio securities that the current net asset value of
the Fund shares might be materially affected by such changes in the value of
the portfolio securities. The Federal Reserve Bank of Boston is not open and
the Fund will similarly not be open on New Year's Day, Martin Luther King's
Birthday, Washington's Birthday, Good Friday, Memorial Day, Independence Day,
Labor Day, Columbus Day, Veteran's Day, Thanksgiving Day and Christmas Day. It
is possible that changing circumstances during the year will result in addition
or deletions to the above lists. The net asset value per share will be computed
by dividing the value of the portfolio securities held by the Fund, plus cash
or other assets, less liabilities, by the total number of shares outstanding at
such time.
As stated in the Prospectus, the Fund will seek to maintain a net asset value
of $1.00 per share. In this connection, the Fund values its portfolio securi-
ties at their amortized cost, as permitted by the Securities and Exchange Com-
mission (the "Commission") under Rule 2a-7 under the Investment Company Act of
1940. This method does not take into account unrealized securities gains or
losses. It involves
S-17
<PAGE>
valuing an instrument at its cost on the date of purchase and thereafter assum-
ing a constant amortization to maturity of any discount or premium. While this
method provides certainty in valuation, it may result in periods during which
the value of an investment, as determined by amortized cost, is higher or lower
than the price the Fund would receive if it sold the instrument. During periods
of declining interest rates, the daily yield on shares of the Fund may tend to
be higher than a like computation made by a fund with identical investments
utilizing a method of valuation based upon market prices and estimates of mar-
ket prices for all of its portfolio instruments. Thus, if the use of the amor-
tized cost method by the Fund resulted in a lower aggregate portfolio value on
a particular day, a prospective investor in the Fund would be able to obtain a
somewhat higher yield than would result from an investment in a fund utilizing
solely market values, and existing investors in the Fund would receive less in-
vestment income. The converse would apply in a period of rising interest rates.
The Fund, as a condition to the use of amortized cost and the maintenance of
its per share net asset value of $1.00, must maintain a dollar-weighted average
portfolio maturity of 90 days or less, only purchase instruments having remain-
ing maturities of 397 days or less, and invest only in securities determined to
be of high quality with minimal credit risks. The Fund may invest in variable
and floating rate instruments even if they carry stated maturities in excess of
397 days, upon certain conditions contained in rules and regulations issued by
the Securities and Exchange Commission under the Investment Company Act of
1940, but will do so only if there is a secondary market for such instruments
or if they carry demand features, permissible under rules of the Commission for
money market funds, to recover the full principal amount thereof upon specified
notice at par, or both.
The Board of Trustees, pursuant to Rule 2a-7, has established procedures de-
signed to stabilize, to the extent reasonably possible, the Fund's price per
share as computed for the purpose of sales and redemptions at $1.00. Such pro-
cedures will include review of the Fund's portfolio holdings by the Board of
Trustees, at such intervals as it may deem appropriate, to determine whether
the net asset value calculated by using available market quotations or market
equivalents deviates from $1.00 per share based on amortized cost. Market quo-
tations and market equivalents used in such review may be obtained from a pric-
ing agent approved by the Board of Trustees. The Board has selected Nuveen Ad-
visory to act as pricing agent, but in the future may select an independent
pricing service to perform this function. In serving as pricing agent, Nuveen
Advisory will follow guidelines adopted by the Board, and the Board will moni-
tor Nuveen Advisory to see that the guidelines are followed. The pricing agent
will value the Fund's investment based on methods which include consideration
of yield or prices of municipal obligations of comparable quality, coupon, ma-
turity, and type; indications as to values from dealers; and general market
conditions. The pricing agent may employ electronic data processing techniques
and/or a matrix system to determine valuations. The extent of any deviation be-
tween the Fund's net asset value based on the pricing agent's market valuation
and $1.00 per share based on amortized cost will be examined by the Board of
Trustees. If such deviation exceeds 1/2 of 1%, the Board of Trustees will
promptly consider what action, if any, will be initiated. In the event the
Board of Trustees determines that a deviation exists which may result in mate-
rial dilution or other unfair results to investors or existing shareholders, it
has agreed to take such corrective action as it regards as necessary and appro-
priate, including the sale of portfolio instruments prior to maturity to real-
ize capital gains or losses or to shorten average portfolio maturity.
S-18
<PAGE>
TAX MATTERS
Federal Income Tax Matters
The following discussion of federal income tax matters is based upon the advice
of Morgan, Lewis, & Bockius LLP, Washington, D.C., counsel to the Fund.
As described in the Prospectus, the Fund intends to qualify, as it has in prior
years, under Subchapter M of the Internal Revenue Code of 1986, as amended,
(the "Code"), for tax treatment as a regulated investment company. In order to
qualify as a regulated investment company, the Fund must satisfy certain re-
quirements relating to the source of its income, diversification of its assets,
and distributions of its income to shareholders. First, the Fund must derive at
least 90% of its annual gross income (including tax-exempt interest) from divi-
dends, interest, payments with respect to securities loans, gains from the sale
or other disposition of stock or securities, foreign currencies or other income
(including but not limited to gains from options and futures) derived with re-
spect to its business of investing in such stock or securities (the "90% gross
income test"). Second, the Fund must diversify its holdings so that, at the
close of each quarter of its taxable year, (i) at least 50% of the value of its
total assets is comprised of cash, cash items, United States Government securi-
ties, securities of other regulated investment companies and other securities
limited in respect of any one issuer to an amount not greater in value than 5%
of the value of the Fund's total assets and to not more than 10% of the out-
standing voting securities of such issuer, and (ii) not more than 25% of the
value of the total assets it invested in the securities of any one issuer
(other than United States Government securities and securities of other regu-
lated investment companies) or two or more issuers controlled by the Fund and
engaged in the same, similar or related trades or businesses.
As a regulated investment company, the Fund will not be subject to federal in-
come tax on any portion of its net income currently distributed to shareholders
in any taxable year for which it distributes at least 90% of the sum of (i) its
"investment company taxable income" (which includes dividends, taxable inter-
est, taxable original issue discount and market discount income, income from
securities lending, net short-term capital gain in excess of long-term capital
loss, and any other taxable income other than "net capital gain" (the excess of
its net long-term capital gain over its net short-term capital loss) and is re-
duced by deductible expenses) and (ii) its "net tax-exempt interest" (the ex-
cess of its gross tax-exempt interest income over certain disallowed deduc-
tions).
The Fund also intends to satisfy conditions which will enable it to designate
certain distributions, as Exempt Interest Dividends. Shareholders receiving Ex-
empt Interest Dividends will not be subject to regular federal income tax on
the amount of such dividends.
Distributions by the Fund of net interest income received from certain taxable
investments (such as certificates of deposit, commercial paper and obligations
of the United States Government, its agencies and instrumentalities) and net
short-term capital gains realized by the Fund, if any, will be taxable to
shareholders as ordinary income whether received in cash or additional shares.
If the Fund purchases a security at a market discount, any gain realized by the
Fund upon the sale or redemption of the security will be treated as taxable in-
terest income to the extent such gain does not exceed the market discount, and
any gain realized in excess of the market discount will be treated as a capital
gain. Any
S-19
<PAGE>
net long-term capital gains realized by the Fund and distributed to sharehold-
ers in cash or in additional shares will be taxable to shareholders as long-
term capital gains regardless of the length of time investors have owned shares
of the Fund. The Fund does not expect to realize significant long-term capital
gains. Because the taxable portion of the Fund's investment income consists
primarily of interest, none of its dividends, whether or not treated as exempt-
interest dividends, is expected to qualify under the Internal Revenue Code for
the dividends received deductions for corporations.
If the Fund has both tax-exempt and taxable income, it will use the "average
annual" method for determining the designated percentage that is taxable income
and designate the use of such method within 60 days after the end of the Fund's
taxable year. Under this method, one designated percentage is applied uniformly
to all distributions made during the Fund's taxable year. The percentage of in-
come designated as tax-exempt for any particular distribution may be substan-
tially different from the percentage of the Fund's income that was tax-exempt
during the period covered by the distribution.
Although dividends generally will be treated as distributed when paid, divi-
dends declared in October, November or December, payable to shareholders of
record on a specified date in one of those months and paid during the following
January, will be treated as having been distributed by the Fund (and received
by the shareholders) on December 31.
The redemption or exchange of the shares of the Fund is not expected to result
in capital gain or loss to the shareholders because the Fund's net asset value
is expected to remain constant at $1.00 per share. To the extent that the
Fund's net asset value is greater or lesser than $1.00 per share, redemptions
or exchanges may result in capital gain or loss to the shareholder.
In order to avoid a 4% federal excise tax, the Fund must distribute or be
deemed to have distributed by December 31 of each calendar year at least 98% of
its taxable ordinary income for such year, at least 98% of the excess of its
realized capital gains over its realized capital losses (generally computed on
the basis of the one-year period ending on October 31 of such year) and 100% of
any taxable ordinary income and the excess of realized capital gains over real-
ized capital losses for the prior year that was not distributed during such
year and on which the Fund paid no federal income tax. The Fund intends to make
timely distributions in compliance with these requirements and consequently it
is anticipated that it generally will not be required to pay the excise tax.
If in any year the Fund should fail to qualify under Subchapter M for tax
treatment as a regulated investment company, the Fund would incur a regular
corporate federal income tax upon its income for that year, other than interest
income from tax-exempt securities, and distributions to its shareholders out of
net interest income from tax-exempt securities or other investments, or out of
net capital gains, would be taxable to shareholders as ordinary dividend income
for federal income tax purposes to the extent of the Fund's available earnings
and profits.
The Fund may invest in the type of private activity bonds, the interest on
which is not federally tax-exempt to persons who are "substantial users" of the
facilities financed by such bonds or "related persons" of such "substantial us-
ers." Accordingly, the Fund may not be an appropriate investment for sharehold-
ers who are considered either a "substantial user" or a "related person" within
the meaning of
S-20
<PAGE>
the Code. In general, a "substantial user" of a facility financed from the pro-
ceeds of private activity bonds includes a "non-exempt person who regularly
uses a part of such facility in his trade or business." "Related persons" are
in general defined to include persons among whom there exists a relationship,
either by family or business, which would result in a disallowance of losses in
transactions among them under various provisions of the Code (or if they are
members of the same controlled group of corporations under the Code). This in-
cludes a partnership and each of its partners (including their spouses and mi-
nor children) and an S corporation and each of its shareholders (and their
spouses and minor children). Various combinations of these relationships may
also constitute "related persons" under the Code. For additional information,
investors should consult their tax advisers before investing in the Fund.
Federal tax law imposes an alternative minimum tax with respect to both corpo-
rations and individuals. Interest on certain securities, such as bonds issued
to make loans for housing purposes or to private entities (but not for certain
tax-exempt organizations such as universities and non-profit hospitals), is in-
cluded as an item of tax preference in determining the amount of a taxpayer's
alternative minimum taxable income. To the extent that the Fund receives income
from securities subject to the alternative minimum tax, a portion of the divi-
dends paid by it, although otherwise exempt from federal income tax, will be
taxable to shareholders to the extent that their tax liability is determined
under the alternative minimum tax regime. The Fund will annually supply share-
holders with a report indicating the percentage of Fund income attributable to
securities subject to the federal alternative minimum tax.
In addition, the alternative minimum taxable income for corporations is in-
creased by 75% of the difference between an alternative measure of income ("ad-
justed current earnings") and the amount otherwise determined to be the alter-
native minimum taxable income. Interest on all securities, and therefore all
distributions by the Fund that would otherwise be tax-exempt, is included in
calculating a corporation's adjusted current earnings.
Individuals whose provisional income exceeds a base amount will be subject to
federal income tax on up to one-half of their social security or railroad re-
tirement benefits. Provisional income currently includes adjusted gross income,
one-half of social security benefits and tax-exempt interest, including exempt-
interest dividends from the Fund. Individuals whose modified income exceeds the
adjusted base amount are required to include in gross income up to 85% of their
social security or railroad retirement benefits.
The Code provides that interest on indebtedness incurred or continued to pur-
chase or carry shares of the Fund is not deductible. Under rules used by the
IRS for determining when borrowed funds are considered used for the purpose of
purchasing or carrying particular assets, the purchase of shares of a Fund may
be considered to have been made with borrowed funds even though such funds are
not directly traceable to the purchase of shares.
The Fund is required in certain circumstances to withhold 31% of taxable divi-
dends and certain other payments paid to non-corporate holders of shares who
have not furnished to the Fund their correct
S-21
<PAGE>
taxpayer identification number (in the case of individuals, their social secu-
rity number) and certain certificates, or who are otherwise subject to back-up
withholding.
The foregoing is a general and abbreviated summary of the provisions of the
Code and Treasury Regulations presently in effect as they directly govern the
taxation of the Fund and its shareholders. For complete provisions, reference
should be made to the pertinent Code sections and Treasury Regulations. The
Code and Treasury Regulations are subject to change by legislative or adminis-
trative action, and any such change may be retroactive with respect to Fund
transactions. Shareholders are advised to consult their own tax advisers for
more detailed information concerning the federal taxation of the Fund and the
income tax consequences to its shareholders.
State Tax Matters
The following is based on the advice of Morgan, Lewis & Bockius LLP, Washing-
ton, D.C., counsel to the Fund, and assumes that the Fund will be qualified as
a regulated investment company under Subchapter M of the Code and will be qual-
ified thereunder to pay exempt interest dividends.
The exemption from federal income tax for distributions which are designated
Exempt Interest Dividends will not necessarily result in exemption under the
income or other tax laws of any state or local taxing authority. The laws of
the several states and local taxing authorities vary with respect to the taxa-
tion of such distributions, and shareholders of the Fund are advised to consult
their own tax advisers in that regard.
PERFORMANCE INFORMATION
The historical performance of the Fund may be expressed in terms of "yield" or
"effective yield." The "yield" of the Fund is based on the income generated by
an investment in the Fund over a seven day period. The income is then
annualized, i.e. the amount of the income generated by the investment during
that week is assumed to be generated each week over a 52-week period and is ex-
pressed as a percentage of the investment. "Effective yield" is calculated sim-
ilarly except that, when annualized, the income earned by the investment is as-
sumed to be reinvested. Due to this compounding effect, the effective yield
will be slightly higher than the yield. "Taxable equivalent yield" is the yield
that a taxable investment would need to generate in order to equal the Fund's
yield on an after-tax basis for an investor in a stated tax bracket (normally
assumed to be the bracket with the highest marginal tax rate). A taxable equiv-
alent yield quotation will be higher than the yield or the effective yield quo-
tations. The Fund's yield and effective yield for the seven-day period ended
February 28, 1999 were % and %, respectively. These measures of perfor-
mance are described below.
Yield is computed in accordance with a standard method prescribed by rules of
the Securities and Exchange Commission. Under that method, current yield is
based on a seven-day period and is computed as follows: the Fund's net invest-
ment income per share for the period is divided by the price per share (ex-
pected to remain constant at $1.00) at the beginning of the period, the result
(the "base period return") is divided by 7 and multiplied by 365, and the re-
sulting figure is carried to the nearest
S-22
<PAGE>
hundredth of one percent. For the purpose of this calculation, the Fund's net
investment income per share includes its accrued interest income plus or minus
amortized purchase discount or premium less accrued expenses, but does not in-
clude realized capital gains or losses or unrealized appreciation or deprecia-
tion of investments.
The Fund's effective yield is calculated by taking the base period return (com-
puted as described above) and calculating the effect of assumed compounding.
The formula for effective yield is: (base period return + 1)/365///7/-1.
Taxable equivalent yield is computed by dividing that portion of the fund's
yield which is tax-exempt by 1 minus the stated federal income tax rate and
adding the result to that portion, if any, of the yield of the fund that is not
tax-exempt. Based upon (1) a 1999 federal income tax of %, and (2) the
yield for the fund as described above for the seven-day period ended February
28, 1999, the taxable equivalent yield for the fund for that period was %.
The Fund's yield will fluctuate, and the publication of annualized yield quota-
tions is not a representation of what an investment in the Fund will actually
yield for any given future period. Actual yields will depend not only on
changes in interest rates on money market instruments during the period in
question, but also on such matters as the Fund's expenses.
In reports or other communications to shareholders or in advertising and sales
literature, the Fund may compare its performance to that of other money market
mutual funds tracked by Lipper Analytical Services, Inc. ("Lipper"), by
Donoghue's Money Fund Report ("Donoghue's") or similar services or by financial
publications such as Barron's, Changing Times, Forbes and Money Magazine. Per-
formance comparisons by these indexes, services or publications may rank mutual
funds over different periods of time by means of aggregate, average, year-by-
year or other types of performance figures. Lipper ranks mutual funds by over-
all performance, investment objectives, and assets and assumes the reinvestment
of dividends for the period covered. Donoghue's ranks investment results ac-
cording to total return (annualized results net of management fees and ex-
penses) and presents one year results as effective annual yields assuming rein-
vestment of dividends. Any given performance quotation or performance compari-
son should not be considered as representative of the Fund's performance for
any future period.
A comparison of tax-exempt and taxable equivalent yields is one element to con-
sider in making an investment decision. The Fund may from time to time in its
advertising and sales materials compare its then current yields as of a recent
date with the yields on taxable investments such as corporate or U.S. Govern-
ment bonds and bank CDs or money market accounts, each of which has investment
characteristics that may differ from those of the Fund. U.S. Government bonds,
for example, are backed by the full faith and credit of the U.S. Government,
and bank CDs and money market accounts are insured by an agency of the federal
government.
S-23
<PAGE>
The following table shows the effects for individuals of federal income taxes
on the amount that those subject to a given tax rate would have to put into a
tax-free investment in order to generate the same after-tax income as a taxable
investment.*
Read down to find the amount of a tax-free investment at the specified rate
that would provide the same after-tax income as a $50,000 taxable invest-
ment at the stated taxable rate.
<TABLE>
<CAPTION>
2.00% 2.50% 3.00% 3.50% 4.00% 4.50% 5.00%
Taxable Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
3.00% $ 51,750 $41,400 $34,500 $29,571 $25,875 $23,000 $20,700
- --------------------------------------------------------------------------
4.00% $ 69,000 $55,200 $46,000 $39,429 $34,500 $30,667 $27,600
- --------------------------------------------------------------------------
5.00% $ 86,250 $69,000 $57,500 $49,286 $43,125 $38,333 $34,500
- --------------------------------------------------------------------------
6.00% $103,500 $82,800 $69,000 $59,143 $51,750 $46,000 $41,400
- --------------------------------------------------------------------------
7.00% $120,750 $96,600 $80,500 $69,000 $60,375 $53,667 $48,300
</TABLE>
*The dollar amounts in the table reflect a 31% federal income tax rate.
This table is for illustrative purposes only and is not intended to predict the
actual return you might earn on your investment. The Fund occasionally may ad-
vertise its performance in similar tables using a different current tax rate
than that shown here. The tax rate shown here may be higher or lower than your
actual tax rate; a higher tax rate would tend to make the dollar amounts in the
table lower, while a lower tax rate would make the amounts higher. You should
consult your tax adviser to determine your actual tax rate.
ADDITIONAL INFORMATION ABOUT PURCHASESAND SALES
Exchange Privileges
You may exchange shares of the Fund for shares of any other open-end management
investment company with reciprocal exchange privileges (the "Nuveen Funds"),
into an identically registered account provided that the Nuveen Fund into which
shares are to be exchanged is offered in the shareholder's state of residence
and that the shares to be exchanged have been held by the shareholder for a pe-
riod of at least 15 days. Shares of Nuveen Funds purchased subject to a front-
end sales charge may be exchanged for shares of the Fund or any other Nuveen
Fund at the next determined net asset value without any front-end sales charge.
Shares of any Nuveen Fund purchased through dividend reinvestment or through
reinvestment of Nuveen Unit Trust distributions (and any dividends thereon) may
be exchanged for shares of the Fund or any other Nuveen Fund without a front-
end sales charge. Exchanges of shares with respect to which no front-end sales
charge has been paid will be made at the public offering price, which may in-
clude a front-end sales charge, unless a front-end sales charge has previously
been paid on the investment represented by the exchanged shares (i.e., the
shares to be exchanged were originally issued in exchange for shares on which a
front-end sales charge was paid), in which case the exchange will be made at
net asset value. Because certain other Nuveen Funds may determine net asset
value and therefore honor purchase or redemption requests on days when the Fund
S-24
<PAGE>
does not (generally, Martin Luther King's Birthday, Columbus Day and Veteran's
Day), exchanges of shares of one of those funds for shares of the Fund may not
be affected on such days.
The total value of shares being exchanged must at least equal the minimum in-
vestment requirement of the Nuveen Fund into which they are being exchanged.
Exchanges are made based on the relative dollar values of the shares involved
in the exchange, and will be effected by redemption of shares of the Nuveen
Fund held and purchase of the shares of the other Nuveen Fund. For federal in-
come tax purposes, any such exchange constitutes a sale and purchase of shares
and may result in capital gain or loss. Before exercising any exchange, you
should obtain the Prospectus for the Nuveen Fund into which shares are to be
exchanged and read it carefully. If the registration of the account for the
Fund you are purchasing is not exactly the same as that of the Fund account
from which the exchange is made, written instructions from all holders of the
account from which the exchange is being made must be received, with signatures
guaranteed by a member of any approved Medallion Guarantee Program or in such
other manner as may be acceptable to the Fund. You may also make exchanges by
telephone if a pre-authorized exchange authorization, as provided on the ac-
count Application Form, is on file with Shareholder Services, Inc., the Fund's
shareholder service agent. The exchange privilege may be modified or discontin-
ued at any time.
Additional Information
An account will be maintained for each shareholder of record in the Fund by our
Transfer Agent. Share certificates will be issued only upon written request of
the shareholder to our Transfer Agent. No certificates are issued for frac-
tional shares. The Fund reserves the right to reject any purchase order and to
waive or increase minimum investment requirements.
Confirmations of each purchase and redemption order as well as monthly state-
ments are sent to every shareholder. Master accounts also receive a monthly
summary report setting forth the share balance and dividends earned for the
month for each sub-account established under that master account.
To assist those institutions performing their own sub-accounting, same day in-
formation as to the Fund's daily per share income to seven decimal places and
the one-day yield to four decimal places are normally available by 3:30 p.m.,
Eastern Time.
A change in registration or transfer of shares held in the name of a
broker/dealer can only be effected by an order in good form from the
broker/dealer acting on behalf of the investor. Broker/dealers are encouraged
to open single master accounts. However, some broker/dealers may wish to use
our Transfer Agent's sub-accounting system to minimize their internal record-
keeping requirements. A broker/dealer or other investor requesting shareholder
servicing or accounting other than the master account or subaccounting service
offered by the Fund will be required to enter into a separate agreement with
the agent for these services for a fee to be determined in accordance with the
level of services to be furnished.
Banks and other organizations through which investors may purchase shares of
the Fund may impose charges in connection with purchase orders. Investors
should contact their institutions directly to determine what charges, if any,
may be imposed.
S-25
<PAGE>
Subject to the rules of the SEC, the Fund reserves the right to suspend the
continuous offering of the shares at any time, but such suspension shall not
affect the shareholder's right of redemption as described below. The Fund also
reserves the right to reject any purchase order and to waive or increase mini-
mum investment requirements.
Redemption in Kind
The Fund has committed to pay in cash all redemption requests made by each
shareholder during any 90 day period up to the lesser of $250,000 or 1% of the
net asset value of the Fund at the beginning of such period. This commitment is
irrevocable without the prior approval of the SEC and is a fundamental policy
of the Fund which may not be changed without shareholder approval. In the case
of redemption requests in excess of such amounts, the Board of Directors re-
serves the right to have the Fund make payment in whole or in part in securi-
ties or other assets of the Fund in case of an emergency or any time a cash
distribution would impair the liquidity of the Fund to the detriment of the ex-
isting shareholders. In this event, the securities would be valued in the same
manner as the portfolio of the Fund is valued. If the recipient were to sell
such securities, he or she would incur brokerage charges.
Other Practices
The Fund may suspend the right of redemption or delay payment more than seven
days (a) during any period when the New York Stock Exchange is closed (other
than customary weekend and holiday closings), (b) when trading in the markets
the Fund normally utilizes is restricted, or an emergency exists as determined
by the SEC so that disposal of the Fund's investments or determination of its
net asset value is not reasonably practicable, or (c) for such other periods as
the SEC by order may permit for protection of the shareholders of the Fund.
The Fund has authorized certain brokers and firms to accept purchase and re-
demption orders on its behalf. The Fund will consider an order to be "received"
when such a broker or firm accepts the order from its customer.
In addition to the types of compensation to dealers to promote sales of Fund
shares that are described in the prospectus, Nuveen may from time to time make
additional reallowances only to certain authorized dealers who sell or are ex-
pected to sell certain minimum amounts of shares of the Nuveen Mutual Funds
during specified time periods.
OTHER INFORMATION REGARDING SHARES OF THE FUND
Shareholders should note that when a Fund dividend check has been returned to
the sender by the post office after repeated mailings, the shareholder account
will thereafter be registered for automatic reinvestment of dividends and thus
the dividend check and future dividend checks will be reinvested in additional
Fund shares. Shareholders are reminded that they need to advise the Funds
promptly in writing of any change in address.
S-26
<PAGE>
The Glass-Steagall Act and other applicable laws, among other things, may limit
banks from engaging in the business of underwriting, selling or distributing
securities. Since the only functions of banks who may be engaged as service or-
ganizations is to perform administrative shareholder servicing functions, the
Fund believes that such laws should not preclude a bank from acting as a serv-
ice organization. However, future changes in either federal or state statutes
or regulations relating to the permissible activities of banks and their sub-
sidiaries or affiliates, as well as judicial or administrative decisions or in-
terpretations of statutes or regulations, could prevent a bank from continuing
to perform all or a part of its shareholder servicing activities. If a bank
were prohibited from so acting, its shareholder customers would be permitted to
remain shareholders of the Fund and alternative means for continuing the ser-
vicing of such shareholders would be sought.
Nuveen serves as the principal underwriter of the shares of the Fund pursuant
to a "best efforts" arrangement as provided by a distribution agreement with
the Fund, dated April 30, 1982 and last renewed on July 31, 1998 ("Distribution
Agreement"). Pursuant to the Distribution Agreement, the Fund appointed Nuveen
to be its agent for the distribution of the Fund's shares on a continuous of-
fering basis. Nuveen sells shares to or through brokers, dealers, banks or
other qualified financial intermediaries (collectively referred to as "Deal-
ers"), or others, in a manner consistent with the Funds then effective regis-
tration statement. Pursuant to the Distribution Agreement, Nuveen, at its own
expense, finances certain activities incident to the sale and distribution of
the Fund's shares, including printing and distributing of prospectuses and
statements of additional information to other than existing shareholders, the
printing and distributing of sales literature, advertising and payment of com-
pensation and giving of concessions to dealers. Expenses incurred in register-
ing the Fund and its shares under federal and state securities laws are paid by
the Fund.
To help advisers and investors better understand and more efficiently use an
investment in the Fund to reach their investment goals, the Fund and its spon-
sor, Nuveen, may advertise and create specific investment programs and systems.
For example, such activities may include presenting information on how to use
an investment in the Fund, alone or in combination with an investment in other
mutual funds or unit investment trusts sponsored by Nuveen, to accumulate as-
sets for future education needs or periodic payments such as insurance premi-
ums. The Fund and its sponsor may produce software or additional sales litera-
ture to promote the advantages of using the Fund to meet these and other spe-
cific investor needs.
S-27
<PAGE>
Statement of Additional Information
June 10, 1999
Nuveen Money Market Trust
333 West Wacker Drive
Chicago, Illinois 60606
Nuveen Money Market Trust
NUVEEN MUNICIPAL MONEY MARKET FUND
This Statement of Additional Information is not a prospectus. This Statement of
Additional Information should be read in conjunction with the Prospectus of the
Nuveen Municipal Money Market Fund dated June 10, 1999. The Prospectus may be
obtained without charge from certain securities representatives, banks, and
other financial institutions that have entered into sales agreements with John
Nuveen & Co. Incorporated, or from the Fund by mailing a written request to the
Fund, c/o John Nuveen & Co. Incorporated ("Nuveen"), 333 West Wacker Drive,
Chicago, Illinois 60606 or by calling (800) 257-8787.
<TABLE>
<S> <C>
Table of Contents Page
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Investment Policies and Investment Portfolio S-2
- ------------------------------------------------------------
Management S-11
- ------------------------------------------------------------
Investment Adviser and Investment Management Agreement S-15
- ------------------------------------------------------------
Portfolio Transactions S-16
- ------------------------------------------------------------
Net Asset Value S-17
- ------------------------------------------------------------
Tax Matters S-18
- ------------------------------------------------------------
Performance Information S-22
- ------------------------------------------------------------
Additional Information About Purchases and Sales S-25
- ------------------------------------------------------------
Service Plan S-28
- ------------------------------------------------------------
Other Information Regarding Shares of the Fund S-29
- ------------------------------------------------------------
</TABLE>
Principal Underwriter Investment Adviser Independent Public Accountants
John Nuveen & Co. Incorporated
Nuveen Advisory for the Fund
Corp., Subsidiary
of John Nuveen &
Co. Incorporated
Arthur Andersen LLP
Chicago: 33 West Monroe Street
333 West Wacker Drive Chicago, Illinois 60603
Chicago, Illinois 60606 333 West Wacker
Drive
(312) 917-7700
Chicago, Illinois
60606
Transfer and Dividend
New York: Disbursing Agent
10 East 50th Street Chase Global Funds
New York, New York 10022Custodian Services Company
(212) 207-2000 The Chase Manhattan P.O. Box 5186
Bank New York, New York 10274
4 New York Plaza
New York, New York
10004
<PAGE>
FUNDAMENTAL POLICIES AND INVESTMENT PORTFOLIO
Fundamental Policies
The Fund's investment objective and certain fundamental policies are described
in the Prospectus. The Fund, as a fundamental policy, may not, without the ap-
proval of the holders of a majority of the shares:
(1) Invest in securities other than Municipal Obligations and temporary in-
vestments as those terms are defined in the Prospectus;
(2) Invest more than 5% of its total assets in securities of any one issuer,
excluding the United States government, its agencies and instrumentalities;
(3) Borrow money, except for temporary or emergency purposes and not for in-
vestment purposes and then only in an amount not exceeding (a) 10% of the
value of the Fund's total assets at the time of borrowing or (b) one-third of
the value of the Fund's total assets including the amount borrowed in order to
meet redemption requests which might otherwise require the untimely disposi-
tion of securities. While any such borrowings exceed 5% of total assets, no
additional purchases of investment securities will be made by the Fund. If due
to market fluctuations or other reasons the value of the Fund's assets fall
below 300% of its borrowings, the Fund will reduce its borrowings within 3
business days. To do this, the Fund may have to sell a portion of its invest-
ments at a time when it may be disadvantageous to do so;
(4) Pledge, mortgage or hypothecate its assets, except that, to secure
borrowings permitted by subparagraph (3) above, it may pledge securities hav-
ing a market value at the time of pledge not exceeding 10% of the value of the
Fund's total assets;
(5) Issue senior securities as defined in the Investment Company Act of 1940
except to the extent such issuance might be involved with respect to
borrowings described under item (3) above;
(6) Underwrite any issue of securities, except to the extent that the purchase
of Municipal Obligations in accordance with the Fund's investment objective,
policies, and limitations, may be deemed to be an underwriting;
(7) Purchase or sell real estate, but this shall not prevent the Fund from in-
vesting in Municipal Obligations secured by real estate or interests therein
or foreclosing upon and selling such security;
(8) Purchase or sell commodities or commodities contracts or oil, gas or other
mineral exploration or development programs;
(9) Make loans, other than by entering into repurchase agreements and through
the purchase of Municipal Obligations or temporary investments in accordance
with its investment objective, policies and limitations;
(10) Make short sales of securities or purchase any securities on margin, ex-
cept for such short-term credits as are necessary for the clearance of trans-
actions;
(11) Write or purchase put or call options, except to the extent that the pur-
chase of a stand-by commitment may be considered the purchase of a put;
S-2
<PAGE>
(12) Concentrate more than 25% of its assets in the securities of issuers in
any single industry; provided, however, that such limitations shall not be ap-
plicable on the purchase of Municipal Obligations issued by governments or po-
litical subdivisions of governments, and obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities;
(13) Invest more than 10% of its assets in repurchase agreements maturing in
more than seven days, "illiquid" securities (such as non-negotiable CDs) and
securities without readily available market quotations.
For the purpose of applying the limitations set forth in paragraph (2) above,
the issuer shall be deemed a separate issuer when its assets and revenues are
separate from other governmental entities and its securities are backed only
by its assets and revenues. Similarly, in the case of a non-governmental user,
such as an industrial corporation or a privately owned or operated hospital,
if the security is backed only by the assets and revenues of the non-govern-
mental user then such non-governmental user would be deemed to be the sole is-
suer. Where a security is also backed by the enforceable obligation of a supe-
rior or unrelated governmental entity or other entity (other than a bond in-
surer) it shall be included in the computation of securities owned that are
issued by such governmental entity or other entity.
Where a security is guaranteed by a governmental entity or some other facili-
ty, such as a bank guarantee or letter of credit, such a guarantee or letter
of credit would be considered a separate security and would be treated as an
issue of such government, other entity or bank. Where a security is insured by
bond insurance, it shall not be considered a security issued or guaranteed by
the insurer; instead the issuer of such security will be determined in accor-
dance with the principles set forth above. The foregoing restrictions do not
limit the percentage of the Fund's assets that may be invested in securities
insured by any single insurer. It is a fundamental policy of the Fund, which
cannot be changed without the approval of the holders of a majority of shares
of such Fund, that the Fund will not hold securities of a single bank, includ-
ing securities backed by a letter of credit of such bank, if such holdings
would exceed 10% of the total assets of the Fund.
The foregoing restrictions and limitations, as well as the Fund's policies as
to ratings of Fund investments, will apply only at the time of purchase of se-
curities, and the percentage limitations will not be considered violated un-
less an excess or deficiency occurs or exists immediately after and as a re-
sult of an acquisition of securities, unless otherwise indicated.
The foregoing fundamental investment policies, together with the investment
objective of the Fund, cannot be changed without approval by holders of a "ma-
jority of the Fund's outstanding voting shares." As defined in the Investment
Company Act of 1940, this means the vote of (i) 67% or more of the Fund's
shares present at a meeting, if the holders of more than 50% of the Fund's
shares are present or represented by proxy, or (ii) more than 50% of the
Fund's shares, whichever is less.
S-3
<PAGE>
General Information
The Nuveen Money Market Trust (the "Trust") is an open-end management series
investment company organized as a Massachusetts business trust on January 15,
1999. The Fund (formerly, the Nuveen Tax-Free Reserves, Inc., the Fund's pred-
ecessor) is an open-end, diversified management investment company organized
as a series of the Trust. The Trust is an open-end management series company
under SEC Rule 18f-2. The Fund is a separate series issuing its own shares.
The Trust currently has five series. Certain matters under the Investment Com-
pany Act of 1940 which must be submitted to a vote of the holders of the out-
standing voting securities of a series company shall not be deemed to have
been effectively acted upon unless approved by the holders of a majority of
the outstanding voting securities of each series affected by such matter.
The Trust is an entity of the type commonly known as a "Massachusetts business
trust." Under Massachusetts law, shareholders of a trust may, under certain
circumstances, be held personally liable as partners for its obligations. How-
ever, the Declaration of Trust contains an express disclaimer of shareholder
liability for acts or obligations of the Trust and requires that notice of
this disclaimer be given in each agreement, obligation or instrument entered
into or executed by the Trust or the Trustees. The Declaration of Trust fur-
ther provides for indemnification out of the assets and property of the Trust
for all loss and expense of any shareholder personally liable for the obliga-
tions of the Trust. Thus, the risk of a shareholder incurring financial loss
on account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself were unable to meet its ob-
ligations. The Trust believes the likelihood of these circumstances is remote.
Fund Shares represent an interest in the same portfolio of investments of the
Fund. Fund Shares have equal rights as to voting, redemption, dividends and
liquidation, and have exclusive voting rights with respect to any applicable
distribution or service plan. There are no conversion, preemptive or other
subscription rights. The Board of Trustees of the Fund has the right to estab-
lish additional series and classes of shares in the future, to change those
series or classes and to determine the preferences, voting powers, rights and
privileges thereof.
Year 2000 Issues
The "Year 2000" problem refers to the fact that many computer programs use
only the last two digits of a year, and do not recognize a year that begins
with "20" instead of "19." If this problem is not corrected, computers could
function improperly or not at all, which could affect the global economy. The
SEC has urged securities issuers to disclose the steps they are taking to cor-
rect any Year 2000 problems.
The Fund invests primarily in money market instruments. If the issuers of
these instruments do not correct any Year 2000 problems in a timely manner,
they could experience problems in conducting their operations or in making
payments on their securities, which could cause the value of these securities
to decline. Issuers could experience three types of Year 2000 problems. First,
if an issuer's internal computer systems experience Year 2000 problems, this
could disrupt an issuer's operations (such as its ability to collect local
taxes or fees). Second, an issuer may rely on other parties for the payments
that support its debt service, such as servicers that collect mortgage or stu-
dent loan payments, and those third parties may have Year 2000 problems that
interfere with their ability to for-
S-4
<PAGE>
ward payments to the issuer. Third, an issuer may have mechanical problems in
sending payments to its securities holders.
Nuveen Advisory is obtaining information about the Year 2000 readiness of the
issuers of its portfolio securities as part of its on-going surveillance of the
creditworthiness of those issuers.
Portfolio Securities
The various securities in which the Fund intends to invest are described in the
Prospectus. The following is a more complete description of certain Municipal
Obligations in which the Fund may invest:
Municipal Obligations
The Fund invests in debt obligations issued by states, cities and local author-
ities to obtain funds for various public purposes, including the construction
of such public facilities as airports, bridges, highways, housing, hospitals,
mass transportation, schools, streets and water and sewer works. Other public
purposes for which these securities may be issued include the refinancing of
outstanding obligations, the obtaining of funds for general operating expenses
and for loans to other public institutions and facilities. In addition, certain
industrial development bonds and pollution control bonds may be included within
the term Municipal Obligations if the interest paid thereon qualifies as exempt
from federal income tax.
Two principal classifications of these securities (sometimes called Municipal
Obligations) are "general obligation" and "revenue" bonds. General obligation
bonds are secured by the issuer's pledge of its full faith, credit and taxing
power for the payment of principal and interest. Revenue bonds are payable only
from the revenues derived from a particular facility or class of facilities or,
in some cases, from the proceeds of a special excise or other specific revenue
source. Industrial development and pollution control bonds are in most cases
revenue bonds and do not generally constitute the pledge of the credit or tax-
ing power of the issuer of such bonds.
Municipal Obligations can be further classified between bonds and notes. Bonds
are issued to raise longer-term capital but, when purchased by the Fund, will
have 397 days or less remaining until maturity or will have a variable or
floating rate of interest. These issues may be either general obligation bonds
or revenue bonds.
Notes are short-term instruments with a maturity of two years or less. Most
notes are general obligations of the issuer and are sold in anticipation of a
bond sale, collection of taxes or receipt of other revenues. Payment of these
notes is primarily dependent upon the issuer's receipt of the anticipated reve-
nues.
Municipal Obligations also include very short-term unsecured, negotiable prom-
issory notes, issued by states, municipalities, and their agencies, which are
known as "tax-exempt commercial paper" or "municipal paper." Payment of princi-
pal and interest on issues of municipal paper may be made from various sources,
to the extent that funds are available therefrom. There is a limited secondary
market for issues of municipal paper.
S-5
<PAGE>
While these various types of notes as a group represent the major portion of
the tax-exempt note market, other types of notes are occasionally available in
the marketplace and the Fund may invest in such other types of notes to the ex-
tent consistent with its investment objective and limitations. Such notes may
be issued for different purposes and with different security than those men-
tioned above.
The yields on Municipal Obligations are dependent on a variety of factors, in-
cluding the condition of the general money market and the Municipal Obligation
market, the size of a particular offering, the maturity of the obligation and
the rating of the issue. The ratings of Moody's and S&P represent their opin-
ions as to the quality of those Municipal Obligations which they undertake to
rate. It should be emphasized, however, that ratings are general and are not
absolute standards of quality. Consequently, Municipal Obligations with the
same maturity, coupon and rating may have different yields while obligations of
the same maturity and coupon with different ratings may have the same yield.
The market value of outstanding Municipal Obligations will vary with changes in
prevailing interest rate levels and as a result of changing evaluations of the
ability of their issuers to meet interest and principal payments.
Obligations of issuers of debt securities are subject to the provisions of
bankruptcy, insolvency and other laws affecting the rights and remedies of
creditors. In addition, the obligations of such issuers may become subject to
laws enacted in the future by Congress, state legislatures or referenda ex-
tending the time for payment of principal and/or interest, or imposing other
constraints upon enforcement of such obligations or upon municipalities to levy
taxes. There is also the possibility that, as a result of legislation or other
conditions, the power or ability of any issuer to pay, when due, the principal
of and interest on its debt security may be materially affected.
Bond Anticipation Notes (BANs) are usually general obligations of state and lo-
cal governmental issuers which are sold to obtain interim financing for pro-
jects that will eventually be funded through the sale of long-term debt obliga-
tions or bonds. The ability of an issuer to meet its obligations on its BANs is
primarily dependent on the issuer's access to the long-term municipal bond mar-
ket and the likelihood that the proceeds of such bond sales will be used to pay
the principal and interest on the BANs.
Tax Anticipation Notes (TANs) are issued by state and local governments to fi-
nance the current operations of such governments. Repayment is generally to be
derived from specific future tax revenues. TANs are usually general obligations
of the issuer. A weakness in an issuer's capacity to raise taxes due to, among
other things, a decline in its tax base or a rise in delinquencies, could ad-
versely affect the issuer's ability to meet its obligations on outstanding
TANs.
Revenue Anticipation Notes (RANs) are issued by governments or governmental
bodies with the expectation that future revenues from a designated source will
be used to repay the notes. In general they also constitute general obligations
of the issuer. A decline in the receipt of projected revenues, such as antici-
pated revenues from another level of government, could adversely affect an is-
suer's ability to meet its obligations on outstanding RANs. In addition, the
possibility that the revenues would, when received, be used to meet other obli-
gations could affect the ability of the issuer to pay the principal and inter-
est on RANs.
Construction Loan Notes are issued to provide construction financing for spe-
cific projects. Frequently, these notes are redeemed with funds obtained from
the Federal Housing Administration.
S-6
<PAGE>
Bank Notes are notes issued by local governmental bodies and agencies such as
those described above to commercial banks as evidence of borrowings. The pur-
poses for which the notes are issued are varied but they are frequently issued
to meet short-term working-capital or capital-project needs. These notes may
have risks similar to the risks associated with TANs and RANs.
Industrial Development and Pollution Control Bonds are issued by or on behalf
of public authorities to finance various privately-rated facilities. Typically
the interest paid thereon is exempt from federal income tax.
Variable and Floating Rate Instruments. Certain money market instruments may
carry variable or floating rates of interest. Such instruments bear interest at
rates which are not fixed, but which vary with changes in specified market
rates or indices, such as a bank prime rate or tax-exempt money market index.
Variable rate notes are adjusted to current interest rate levels at certain
specified times, such as every 30 days, as set forth in the instrument. A
floating rate note adjusts automatically whenever there is a change in its base
interest rate adjustor, e.g., a change in the prime lending rate or specified
interest rate indices. Typically such instruments carry demand features permit-
ting the Fund to recover the full principal amount thereof upon specified
notice.
One form of variable or floating rate instrument consists of an underlying
fixed rate municipal bond that is subject to a third party demand feature or
"tender option." The holder of the bond would pay a "tender fee" to the third
party tender option provider, the amount of which would be periodically ad-
justed so that the bond/tender option combination would reasonably be expected
to have a market value that approximates the par value of the bond. This
bond/tender option combination would therefore be functionally equivalent to
ordinary variable or floating rate obligations as described above, and the Fund
may purchase such obligations subject to certain conditions specified by the
Securities and Exchange Commission.
The Fund's right to obtain payment at par on a demand instrument upon demand
could be adversely affected by events occurring between the date the Fund
elects to tender the instrument and the date proceeds are due. Nuveen Advisory
will monitor on an ongoing basis the pricing, quality and liquidity of such in-
struments and will similarly monitor the ability of an obligor under the demand
arrangement, including demand obligors as to instruments supported by bank let-
ters of credit or guarantees, to pay principal and interest on demand. Although
the ultimate maturity of such variable rate obligations may exceed one year,
the Fund will treat the maturity of each variable rate demand obligation, for
purposes of computing its dollar-weighted average portfolio maturity, as the
longer of (i) the notice period required before the Fund is entitled to payment
of the principal amount through demand, or (ii) the period remaining until the
next interest rate adjustment.
The Fund may also obtain standby commitments with respect to Municipal Obliga-
tions. Under a standby commitment (often referred to as a put), the party issu-
ing the commitment agrees to purchase at the Fund's option the Municipal Obli-
gation at an agreed-upon price on certain dates or within a specific period.
Since the value of a standby commitment depends in part upon the ability of the
issuing party to meet its purchase obligations thereunder, the Fund will enter
into standby commitments only with parties which have been evaluated by Nuveen
Advisory and, in the opinion of Nuveen Advisory, present minimal credit risks.
S-7
<PAGE>
The amount payable to the Fund upon its exercise of a standby commitment would
be (1) the acquisition cost of the Municipal Obligations (excluding any accrued
interest that the Fund paid on acquisition), less any amortized market premium
or plus any amortized market or original during the period the Fund owned the
security, plus (2) all interest accrued on the security since the last interest
payment date during the period the security was owned by the Fund. The Fund's
right to exercise standby commitments held by it will be unconditional and un-
qualified. The acquisition of a standby commitment will not affect the valua-
tion of the underlying security, which will continue to be valued in accordance
with the amortized cost method. The standby commitment itself will be valued at
zero in determining net asset value. The Fund may purchase standby commitments
for cash or pay a higher price for portfolio securities which are acquired sub-
ject to such a commitment (thus reducing the yield to maturity otherwise avail-
able for the same securities). The maturity of a Municipal Obligation purchased
by the Fund will not be considered shortened by any standby commitment to which
such security is subject. Although the Fund's rights under a standby commitment
would not be transferable, the Fund could sell Municipal Obligations which were
subject to a standby commitment to a third party at any time.
When-Issued Securities
The Fund may purchase and sell Municipal Obligations on a when-issued or de-
layed delivery basis. When-issued and delayed delivery transactions arise when
securities are purchased or sold with payment and delivery beyond the regular
settlement date. (When-issued transactions normally settle within 30-45 days.)
On such transactions the payment obligation and the interest rate are fixed at
the time the buyer enters into the commitment. The commitment to purchase secu-
rities on a when-issued or delayed delivery basis may involve an element of
risk because the value of the securities is subject to market fluctuation, no
interest accrues to the purchaser prior to settlement of the transaction, and
at the time of delivery the market value may be less than cost. At the time the
Fund makes the commitment to purchase a Municipal Obligation on a when-issued
or delayed delivery basis, it will record the transaction and reflect the
amount due and the value of the security in determining its net asset value.
Likewise, at the time the Fund makes the commitment to sell a Municipal Obliga-
tion on a delayed delivery basis, it will record the transaction and include
the proceeds to be received in determining its net asset value; accordingly,
any fluctuations in the value of the Municipal Obligation sold pursuant to a
delayed delivery commitment are ignored in calculating net asset value so long
as the commitment remains in effect. The Fund will maintain designated readily
marketable assets at least equal in value to commitments to purchase when-is-
sued or delayed delivery securities, such assets to be segregated by the Custo-
dian specifically for the settlement of such commitments. The Fund will only
make commitments to purchase Municipal Obligations on a when-issued or delayed
delivery basis with the intention of actually acquiring the securities, but the
Fund reserves the right to sell these securities before the settlement date if
it is deemed advisable. If a when-issued security is sold before delivery any
gain or loss would not be tax-exempt.
Taxable Investments
Taxable investments (sometimes called "Temporary Investments") include obliga-
tions of the United States Government, its agencies or instrumentalities; debt
securities of issuers having, at the time of purchase, a quality rating within
the two highest grades by either Moody's Investors Service, Inc. ("Moody's") or
Standard & Poor's Corporation ("S&P") (Aaa or Aa, or AAA or AA, respectively);
S-8
<PAGE>
commercial paper rated in the highest grade by either of such rating services
(Prime-1 or A-1, respectively); certificates of deposit of domestic banks with
assets of $1 billion or more; and Municipal Obligations and U.S. Government ob-
ligations subject to short-term repurchase agreements.
Subject to the limitations described in the Prospectus the Fund may invest in
the following taxable investments:
U.S. Government Direct Obligations--issued by the United States Treasury and
include bills, notes, and bonds.
- --Treasury bills are issued with maturities of up to one year. They are issued
in bearer form, are sold on a discount basis and are payable at par value at
maturity.
- --Treasury notes are longer-term interest-bearing obligations with original ma-
turities of one to seven years.
- --Treasury bonds are longer-term interest-bearing obligations with original ma-
turities from five to thirty years.
U.S. Government Agencies Securities--Certain federal agencies have been estab-
lished as instrumentalities of the United States government to supervise and
finance certain types of activities. These agencies include, but are not lim-
ited to the Bank for Cooperatives, Federal Land Banks, Federal Intermediate
Credit Banks, Federal Home Loan Banks, Federal National Mortgage Association,
Government National Mortgage Association, Export-Import Bank of the United
States and Tennessee Valley Authority. Issues of these agencies, while not di-
rect obligations of the United States government, are either backed by the full
faith and credit of the United States or are guaranteed by the Treasury or sup-
ported by the issuing agencies' right to borrow from the Treasury. There can be
no assurance that the United States government itself will pay interest and
principal on securities as to which it is not so legally obligated.
Certificates of Deposit (CDs)--A certificate of deposit is a negotiable inter-
est-bearing instrument with a specific maturity. CDs are issued by banks in ex-
change for the deposit of funds and normally can be traded in the secondary
market, prior to maturity. The Fund will only invest in U.S. dollar denominated
CDs issued by U.S. banks with assets of $1 billion or more.
Commercial Paper--Commercial paper is the term used to designate unsecured
short-term promissory notes issued by corporations. Maturities on these issues
vary from a few to 397 days. Commercial paper may be purchased from U.S. corpo-
rations.
Other Corporate Obligations--The Fund may purchase notes, bonds and debentures
issued by corporations if at the time of purchase there is less than 397 days
remaining until maturity or if they carry a variable or floating rate of inter-
est.
Repurchase Agreements--A repurchase agreement is a contractual agreement
whereby the seller of securities (U.S. Government or Municipal Obligations)
agrees to repurchase the same security at a specified price on a future date
agreed upon by the parties. The agreed upon repurchase price determines the
yield during the Fund's holding period. Repurchase agreements are considered to
be loans collateralized by the underlying security that is the subject of the
repurchase contract. The Fund will only enter into repurchase agreements with
dealers, domestic banks or recognized financial institutions that in the opin-
ion of Nuveen Advisory represent minimal credit risk. The risk to the Fund is
limited to the
S-9
<PAGE>
ability of the issuer to pay the agreed upon repurchase price on the delivery
date; however, although the value of the underlying collateral at the time the
transaction is entered into always equals or exceeds the agreed upon repurchase
price, if the value of the collateral declines there is a risk of loss of both
principal and interest. In the event of default, the collateral may be sold but
the Fund might incur a loss if the value of the collateral declines, and might
incur disposition costs or experience delays in connection with liquidating the
collateral. In addition, if bankruptcy proceedings are commenced with respect
to the seller of the security, realization upon the collateral by the Fund may
be delayed or limited. Nuveen Advisory will monitor the value of the collateral
at the time the transaction is entered into and at all times subsequent during
the term of the repurchase agreement in an effort to determine that the value
always equals or exceeds the agreed upon repurchase price. In the event the
value of the collateral declines below the repurchase price, Nuveen Advisory
will demand additional collateral from the issuer to increase the value of the
collateral to at least that of the repurchase price.
Ratings of Investments
The two highest ratings of Moody's for Municipal Obligations are Aaa and Aa.
Municipal Obligations rated Aaa are judged to be of the "best quality." The
rating of Aa is assigned to Municipal Obligations which are of "high quality by
all standards," but as to which margins of protection or other elements make
long-term risks appear somewhat larger than in Aaa rated Municipal Obligations.
The Aaa and Aa rated Municipal Obligations comprise what are generally known as
"high grade bonds." Moody's bond rating symbols may contain numerical modifiers
of a generic rating classification. The modifier 1 indicates that the bond
ranks at the high end of its category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates that the issue ranks in the lower end of
its generic rating category.
The two highest ratings of S&P for Municipal Obligations are AAA and AA. Munic-
ipal Obligations rated AAA have an extremely strong capacity to pay principal
and interest. The rating of AA indicates that capacity to pay principal and in-
terest is very strong and such bonds differ from AAA issues only in small de-
gree.
The highest rating of Moody's and S&P for federally tax-exempt short-term loans
and notes is VMIG-1 or MIG-I and SP-1, respectively. Obligations designated
VMIG-I and MIG-I are the best quality, enjoying strong protection from estab-
lished cash flows for their servicing or from established and broad-based ac-
cess to the market for refinancing, or both. The designation SP-1 indicates a
very strong or strong capacity to pay principal and interest.
The Fund's ability to purchase commercial paper of tax-exempt and corporate is-
suers is limited to commercial paper rated Prime-1 by Moody's or A-1 by S&P.
The rating Prime-1 (P-1) is the highest commercial paper rating assigned by
Moody's. Issuer's rated P-1 have a superior capacity for repayment of short-
term obligations normally evidenced by the following characteristics: leading
market positions in well-established industries; high rates of return on funds
employed; conservative capitalization structures which moderate reliance on
debt and ample asset protection; broad margins in earnings coverage of fixed
financial charges and high internal cash generation; well-established access to
a range of financial markets and assured sources of alternative liquidity. The
designation A-1 indicates that the degree of safety regarding timely payment is
very strong.
S-10
<PAGE>
Subsequent to its purchase by the Fund, an issue may cease to be rated or its
rating may be reduced below the minimum required for purchase by the Fund. Nei-
ther event requires the elimination of such obligations from the Fund, but
Nuveen Advisory will consider such an event in its determination of whether the
Fund should continue to hold such obligation.
MANAGEMENT
The management of the Trust, including general supervision of the duties per-
formed by Nuveen Advisory under the Investment Management Agreement, is the re-
sponsibility of its Board of Trustees. There are seven trustees of the Trust,
one of whom is an "interested person" (as that term is defined in the Invest-
ment Company Act of 1940). None of the trustees who are not "interested per-
sons" of the Fund has ever been a director or employee of, or consultant to,
Nuveen or its affiliates. The names and business addresses of the trustees and
officers of the Trust and their ages and principal occupations and other affil-
iations during the past five years are set forth below.
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
Positions and Principal Occupations
Name and Address Age Offices with Funds During Past Five Years
- -------------------------------------------------------------------------------
<C> <C> <C> <S>
Timothy R. Schwertfeger*+ 50 Chairman and Trustee Chairman of the Board of
333 West Wacker Drive the Funds (since July
Chicago, IL 60606 1996); Trustee and
President of the Funds
advised by Nuveen
Institutional Advisory
Corp. (since July 1996);
Chairman (since July
1996), Director, and
previously Executive
Vice President, of The
John Nuveen Company,
John Nuveen & Co.,
Nuveen Advisory Corp.
and Nuveen Institutional
Advisory Corp.; Director
(since 1996) of
Institutional Capital
Corporation; Chairman
and Director of Nuveen
Asset Management, Inc.;
Chairman and Director of
Rittenhouse Financial
Services Inc. (since
1999).
- -------------------------------------------------------------------------------
Robert P. Bremner 58 Trustee Private Investor and
3725 Huntington Street, N.W. Management Consultant.
Washington, D.C. 20015
- -------------------------------------------------------------------------------
Lawrence H. Brown 64 Trustee Retired (August 1989) as
201 Michigan Avenue Senior Vice President of
Highwood, IL 60040 The Northern Trust
Company (banking and
trust industry).
- -------------------------------------------------------------------------------
Anne E. Impellizzeri 66 Trustee Executive Director
3 West 29th Street (since 1998) of Manitoga
New York, NY 10001 (center for Russell
Wright's design/home and
landscape); formerly
President and Chief
Executive Officer of
Blanton-Peale,
Institutes of Religion
and Health (a training
and counseling
organization).
</TABLE>
- --------------------------------------------------------------------------------
S-11
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------
<CAPTION>
Positions and Principal Occupations
Name and Address Age Offices with Funds During Past Five Years
- ------------------------------------------------------------------------------------------
<C> <C> <C> <S>
Peter R. Sawers 66 Trustee Adjunct Professor of
22 The Landmark Business and Economics,
Northfield, IL 60093 University of Dubuque,
Iowa; Adjunct Professor,
Lake Forest Graduate
School of Management,
Lake Forest, Illinois;
Chartered Financial
Analyst; Certified
Management Consultant.
- ------------------------------------------------------------------------------------------
William J. Schneider 54 Trustee Senior Partner and Chief
4000 Miller-Valentine Ct. Operating Officer,
P.O. Box 744 Miller-Valentine
Dayton, OH 45401 Partners, Vice
President, Miller-
Valentine Group
(commercial real
estate); Member
Community Advisory
Board, National City
Bank, Dayton, Ohio.
- ------------------------------------------------------------------------------------------
Judith M. Stockdale 51 Trustee Executive Director,
35 E. Wacker Drive Gaylord and Dorothy
Suite 2600 Donnelley Foundation, a
Chicago, IL 60601 private family
foundation (since 1994);
prior thereto, Executive
Director, Great Lakes
Protection Fund (from
1990 to 1994).
- --------------------------------------------------------------------------------
Alan G. Berkshire+ 38 Vice President and Asst. Secretary Vice President and
333 West Wacker Drive since 1998 General Counsel (since
Chicago, IL 60606 September 1997) and
Secretary (since May
1998) of The John Nuveen
Company, John Nuveen &
Co. Incorporated, Nuveen
Advisory Corp. and
Nuveen Institutional
Advisory Corp.; prior
thereto, partner in the
law firm of Kirkland &
Ellis.
- --------------------------------------------------------------------------------
Peter H. D'Arrigo 31 Vice President and Treasurer Vice President of John
333 West Wacker Drive since 1999 Nuveen & Co.
Chicago, IL 60606 Incorporated (since
January 1999), prior
thereto. Assistant Vice
President (from January
1997); formerly,
Associate of John Nuveen
& Co. Incorporated;
Chartered Financial
Analyst.
- --------------------------------------------------------------------------------
Michael S. Davern+ 41 Vice President since 1997 Vice President of Nuveen
333 West Wacker Drive Advisory Corp. (since
Chicago, IL 60606 January 1997); prior
thereto, Vice President
and Portfolio Manager of
Flagship Financial, Inc.
(from September 1991 to
January 1997).
- ------------------------------------------------------------------------------------------
Lorna C. Ferguson+ 53 Vice President since 1998 Vice President of John
333 West Wacker Drive Nuveen & Co.
Chicago, IL 60606 Incorporated; Vice
President of Nuveen
Advisory Corp. and
Nuveen Institutional
Advisory Corp. (since
January 1998).
- ------------------------------------------------------------------------------------------
William M. Fitzgerald+ 35 Vice President since 1996 Vice President of Nuveen
333 West Wacker Drive Advisory Corp. (since
Chicago, IL 60606 December 1995); prior
thereto, Assistant Vice
President of
Nuveen Advisory Corp.
(from September 1992 to
December 1995);
Chartered Financial
Analyst.
- ------------------------------------------------------------------------------------------
Stephen D. Foy+ 44 Vice President and Controller Vice President of John
333 West Wacker Drive since 1998 Nuveen & Co.
Chicago, IL 60606 Incorporated and (since
May 1998) The John
Nuveen Company;
Certified Public
Accountant.
</TABLE>
- --------------------------------------------------------------------------------
S-12
<PAGE>
<TABLE>
- ---------------------------------------------------------------------------------
<CAPTION>
Positions and Principal Occupations
Name and Address Age Offices with Funds During Past Five Years
- ---------------------------------------------------------------------------------
<C> <C> <C> <S>
J. Thomas Futrell+ 43 Vice President since 1991 Vice President of Nuveen
333 West Wacker Drive Advisory Corp.;
Chicago, IL 60606 Chartered Financial
Analyst.
- ---------------------------------------------------------------------------------
Richard A. Huber+ 36 Vice President since 1997 Vice President of Nuveen
333 West Wacker Drive Institutional Advisory
Chicago, IL 60606 Corp. (since March 1998)
and Nuveen Advisory
Corp. (since January
1997); prior thereto,
Vice President and
Portfolio Manager of
Flagship Financial, Inc.
- ---------------------------------------------------------------------------------
Steven J. Krupa+ 41 Vice President since 1990 Vice President of Nuveen
333 West Wacker Drive Advisory Corp.
Chicago, IL 60606
- ---------------------------------------------------------------------------------
Larry W. Martin+ 47 Vice President and Vice President,
333 West Wacker Drive Asst. Secretary since 1993 Assistant Secretary and
Chicago, IL 60606 Assistant General
Counsel of John Nuveen &
Co. Incorporated; Vice
President and Assistant
Secretary of Nuveen
Advisory Corp. and
Nuveen Institutional
Advisory Corp.,
Assistant Secretary of
The John Nuveen Company
and (since January 1997)
Nuveen Asset Management
Inc.
- ---------------------------------------------------------------------------------
Edward F. Neild, IV+ 33 Vice President since 1996 Vice President of Nuveen
333 West Wacker Drive Advisory Corp. and
Chicago, IL 60606 Nuveen Institutional
Advisory Corp. (since
September 1996); prior
thereto, Assistant Vice
President of Nuveen
Advisory Corp. (from
December 1993 to
September 1996) and
Nuveen Institutional
Advisory Corp. (from May
1995 to September 1996);
Chartered Financial
Analyst.
- ---------------------------------------------------------------------------------
Stephen S. Peterson+ 41 Vice President since 1997 Vice President, (since
333 West Wacker Drive September 1997),
Chicago, IL 60606 Assistant Vice President
(from September 1996 to
September 1997), and
Portfolio Manager prior
thereto, of Nuveen
Advisory Corp.;
Chartered Financial
Analyst.
- ---------------------------------------------------------------------------------
Stuart W. Rogers+ 43 Vice President since 1997 Vice President of John
333 West Wacker Drive Nuveen & Co.
Chicago, IL 60606 Incorporated.
- ---------------------------------------------------------------------------------
Thomas C. Spalding, Jr.+ 47 Vice President since 1980 Vice President of Nuveen
333 West Wacker Drive Advisory Corp. and
Chicago, IL 60606 Nuveen Institutional
Advisory Corp.;
Chartered Financial
Analyst.
- ---------------------------------------------------------------------------------
William S. Swanson+ 33 Vice President since 1998 Vice President of John
333 West Wacker Drive Nuveen & Co.
Chicago, IL 60606 Incorporated (since
October 1997); Assistant
Vice President (from
September 1996 to
October 1997) and
formerly, Associate;
Chartered Financial
Analyst.
</TABLE>
- --------------------------------------------------------------------------------
S-13
<PAGE>
<TABLE>
- ---------------------------------------------------------------------------------
<CAPTION>
Positions and Principal Occupations
Name and Address Age Offices with Funds During Past Five Years
- ---------------------------------------------------------------------------------
<C> <C> <C> <S>
Gifford R. Zimmerman+ 42 Vice President since 1993 and Vice President,
333 West Wacker Drive Secretary since 1998 Assistant Secretary and
Chicago, IL 60606 Associate General
Counsel, formerly
Assistant General
Counsel (since September
1997) of John Nuveen &
Co. Incorporated; Vice
President and Assistant
Secretary of Nuveen
Advisory Corp. and
Nuveen Institutional
Advisory Corp.;
Assistant Secretary of
The John Nuveen Company
(since May 1994);
Chartered Financial
Analyst.
</TABLE>
- --------
*Mr. Schwertfeger is an interested person of the Fund.
+Person is affiliated with the Fund and affiliated with the Fund's adviser or
principal underwriter.
Timothy R. Schwertfeger and Peter R. Sawers serve as members of the Executive
Committee of the Board of Trustees. The Executive Committee, which meets be-
tween regular meetings of the Board of Trustees, is authorized to exercise all
of the powers of the Board of Trustees provided that the scope of the powers of
the Executive Committee, unless otherwise specifically authorized by the full
Board, shall be limited to (i) emergency matters where assembling the full
Board in a timely manner is impracticable (and in which event management would
take all reasonable steps to quickly notify the individual Board members of the
actions taken by the Executive Committee), or (ii) matters of administrative or
restricted nature.
The trustees of the Trust are directors, or trustees, as the case may be, of 36
Nuveen open-end portfolios and 55 Nuveen closed-end funds. Mr. Schwertfeger is
also trustee of 11 Nuveen open-end and closed-end funds advised by Nuveen In-
stitutional Advisory Corp.
The following table sets forth compensation paid by the Fund, as its predeces-
sor, during the fiscal year ended February 28, 1999, to each of the trustees.
The Fund has no retirement or pension plans. The officers and trustees affili-
ated with Nuveen serve without any compensation from the Fund.
<TABLE>
<CAPTION>
Total Compensation
From the Fund and
Compensation Fund Complex Paid
Name of Trustee from the Fund to Trustees
- --------------------------------------------------------------------------------
<S> <C> <C>
Robert P. Bremner.............................. $807 $71,500
Lawrence H. Brown.............................. $873 $79,000
Anne E. Impellizzeri........................... $807 $71,500
Peter R. Sawers................................ $807 $72,000
William J. Schneider........................... $807 $71,500
Judith M. Stockdale............................ $807 $72,000
</TABLE>
Each trustee who is not affiliated with Nuveen or Nuveen Advisory will receive
a fee.
The Trust requires no employees other than its officers, all of whom are com-
pensated by Nuveen.
S-14
<PAGE>
INVESTMENT ADVISER AND INVESTMENT MANAGEMENT AGREEMENT
Nuveen Advisory acts as investment adviser for the Fund and in such capacity
manages the investment and reinvestment of the assets of the Fund. Nuveen Advi-
sory also administers the Trust's business affairs, provides office facilities
and equipment and certain clerical, bookkeeping and administrative services,
and permits any of its officers or employees to serve without compensation as
trustees or officers of the Trust if elected to such positions. See "Management
of the Fund" in the Prospectus.
Pursuant to an investment management agreement between Nuveen Advisory and the
Trust, the Fund has agreed to pay annual management fees at the rates set forth
below, which are based on the Fund's average daily net asset value:
<TABLE>
<CAPTION>
Average Daily Net Asset Value Management Fee
- ---------------------------------------------
<S> <C>
First
$125M 0.5000 of 1%
Next $125M 0.4875 of 1%
Next $250M 0.4750 of 1%
Next $500M 0.4625 of 1%
Next $1B 0.4500 of 1%
Over $2B 0.4250 of 1%
</TABLE>
Through December 31, 1999, Nuveen Advisory has undertaken to reimburse Fund ex-
penses in an amount necessary to limit total operating expenses to .75 of 1% of
the Fund's daily net asset value. Thereafter, Nuveen Advisory may choose to
modify, continue or discontinue these reimbursements at its sole discretion.
Before June 1999 Nuveen Advisory's annual management fees were calculated at
the rates set forth below, which are based on the Fund's average daily net as-
set value:
<TABLE>
<CAPTION>
Average Daily Net Asset
Value Management Fees
- -------------------------------------------
<S> <C>
For the first $500 million .5000 of 1%
For the next $500 million .4750 of 1%
For assets over $1 billion .4500 of 1%
</TABLE>
For periods before June 1999, Nuveen Advisory had agreed to waive all or a por-
tion of its management fee or reimburse certain expenses of the Fund in order
to prevent total operating expenses of (including Nuveen Advisory's management
fee, but excluding interest, taxes, fees incurred in acquiring and disposing of
portfolio securities, any asset-based distribution or service fees and, to the
extent permitted, extraordinary expenses) in any fiscal year from exceeding .75
of 1% of the average daily net asset value of the Fund. Nuveen Advisory could
also voluntarily agree to reimburse additional expenses from time to time,
which could be terminated at any time in its discretion. For the last three
fiscal years, the Fund, as its predecessor, paid net management fees to Nuveen
Advisory as follows:
S-15
<PAGE>
<TABLE>
<CAPTION>
Management Fees
Net of Expense Reimbursement Fee Waivers and
Paid to Nuveen Advisory Expense Reimbursements
for the Year Ended for the Year Ended
-------------------------------------------------------
2/28/97 2/28/98 2/28/99 2/28/97 2/28/98 2/28/99
-----------------------------------------
<S> <C> <C> <C> <C> <C>
$1,377,941 $1,196,845 -- -- $178,780 --
</TABLE>
Nuveen Advisory is a wholly-owned subsidiary of John Nuveen & Co. Incorporated
("Nuveen"), the Fund's principal underwriter. Nuveen and its affiliates have
sponsored or underwritten more than $60 billion of investment company securi-
ties. Over 1,300,000 individuals have invested to date in Nuveen's funds and
trusts. Founded in 1898, Nuveen is a subsidiary of The John Nuveen Company
which, in turn, is approximately 78% owned by The St. Paul Companies, Inc.
("St. Paul"). St. Paul is located in St. Paul, Minnesota and is principally en-
gaged in providing property-liability insurance through subsidiaries.
Nuveen Advisory's portfolio managers call upon the resources of Nuveen's Re-
search Department. The Nuveen Research Department reviews more than $100 bil-
lion in municipal bonds every year.
The Fund, the other Nuveen funds, Nuveen Advisory, and other related entities
have adopted a code of ethics which essentially prohibits all Nuveen fund man-
agement personnel, including Nuveen fund portfolio managers, from engaging in
personal investments which compete or interfere with, or attempt to take advan-
tage of, the Fund's anticipated or actual portfolio transactions, and is de-
signed to assure that the interest of Fund shareholders are placed before the
interest of Nuveen personnel in connection with personal investment transac-
tions.
PORTFOLIO TRANSACTIONS
Nuveen Advisory, in effecting purchases and sales of portfolio securities for
the account of the Fund, will place orders in such manner as, in the opinion of
management, will offer the best price and market for the execution of each
transaction. Portfolio securities will normally be purchased directly from an
underwriter or in the over-the-counter market from the principal dealers in
such securities, unless it appears that a better price or execution may be ob-
tained elsewhere. Portfolio securities will not be purchased from Nuveen or its
affiliates except in compliance with the Investment Company Act of 1940.
The Fund since its inception has effected all portfolio transactions on a prin-
cipal (as opposed to an agency) basis and, accordingly, has not paid any bro-
kerage commissions.
Purchases from underwriters include a commission or concession paid by the is-
suer to the underwriter, and purchases from dealers include the spread between
the bid and asked price. Given the best price and execution obtainable, it is
the practice of the Fund to select dealers which, in addition, furnish research
information (primarily credit analyses of issuers) and statistical and other
services to Nuveen Advisory. It is not possible to place a dollar value on in-
formation and statistical and other services received from dealers. Since it is
only supplementary to Nuveen Advisory's own research efforts, the receipt of
research information is not expected to reduce significantly Nuveen Advisory's
expenses. Any
S-16
<PAGE>
research benefits obtained are available to all of Nuveen Advisory's other cli-
ents. While Nuveen Advisory will be primarily responsible for the placement of
the Fund's business, the policies and practices of Nuveen Advisory in this re-
gard must be consistent with the foregoing and will, at all times, be subject
to review by the Board of Trustees of the Fund.
Nuveen Advisory reserves the right to, and does, manage other investment ac-
counts and investment companies or other clients which may have investment ob-
jectives similar to the Fund. Subject to applicable laws and regulations,
Nuveen Advisory will attempt to allocate equitably portfolio transactions among
the Fund and the portfolios of its other clients purchasing securities whenever
decisions are made to purchase or sell securities by the Fund and one or more
of such other clients simultaneously. In making such allocations the main fac-
tors to be considered will be the respective investment objectives of the Fund
and such other clients, the relative size of portfolio holdings of the same or
comparable securities, the availability of cash for investment by the Fund and
such other clients, the size of investment commitments generally held by the
Fund and such other clients and opinions of the persons responsible for recom-
mending investments to the Fund and such other clients.
While this procedure could have a detrimental effect on the price or amount of
the securities available to the Fund from time to time, it is the opinion of
the Fund's Board of Trustees that the benefits available from Nuveen Advisory's
organization will outweigh any disadvantage that may arise from exposure to si-
multaneous transactions.
Under the Investment Company Act of 1940, the Fund may not purchase portfolio
securities from any underwriting syndicate of which Nuveen is a member except
under certain limited conditions set forth in Rule 10f-3. The Rule sets forth
requirements relating to, among other things, the type of securities purchased
by the Fund and the amount of securities which may be purchased in any one is-
sue. In addition, purchases of securities made pursuant to the terms of the
Rule must be approved at least quarterly by the Board of Trustees of the Fund,
including a majority of the members thereof who are not interested persons of
the Fund.
NET ASSET VALUE
As stated in the Prospectus, the net asset value of the shares of the Fund will
be determined by The Chase Manhattan Bank, the Fund's custodian, as of 12:00
noon, Eastern Time, (1) on each day on which the Federal Reserve Bank of Boston
is normally open and (2) on any day during which there is sufficient degree of
trading in the Fund's portfolio securities that the current net asset value of
the Fund shares might be materially affected by such changes in the value of
the portfolio securities. The Federal Reserve Bank of Boston is not open and
the Fund will similarly not be open on New Year's Day, Martin Luther King's
Birthday, Washington's Birthday, Good Friday, Memorial Day, Independence Day,
Labor Day, Columbus Day, Veteran's Day, Thanksgiving Day and Christmas Day. It
is possible that changing circumstances during the year will result in addition
or deletions to the above lists. The net asset value per share will be computed
by dividing the value of the portfolio securities held by the Fund, plus cash
or other assets, less liabilities, by the total number of shares outstanding at
such time.
S-17
<PAGE>
As stated in the Prospectus, the Fund will seek to maintain a net asset value
of $1.00 per share. In this connection, the Fund values its portfolio securi-
ties at their amortized cost, as permitted by the Securities and Exchange Com-
mission (the "Commission") under Rule 2a-7 under the Investment Company Act of
1940. This method does not take into account unrealized securities gains or
losses. It involves valuing an instrument at its cost on the date of purchase
and thereafter assuming a constant amortization to maturity of any discount or
premium. While this method provides certainty in valuation, it may result in
periods during which the value of an investment, as determined by amortized
cost, is higher or lower than the price the Fund would receive if it sold the
instrument. During periods of declining interest rates, the daily yield on
shares of the Fund may tend to be higher than a like computation made by a fund
with identical investments utilizing a method of valuation based upon market
prices and estimates of market prices for all of its portfolio instruments.
Thus, if the use of the amortized cost method by the Fund resulted in a lower
aggregate portfolio value on a particular day, a prospective investor in the
Fund would be able to obtain a somewhat higher yield than would result from an
investment in a fund utilizing solely market values, and existing investors in
the Fund would receive less investment income. The converse would apply in a
period of rising interest rates.
The Fund, as a condition to the use of amortized cost and the maintenance of
its per share net asset value of $1.00, must maintain a dollar-weighted average
portfolio maturity of 90 days or less, only purchase instruments having remain-
ing maturities of 397 days or less, and invest only in securities determined to
be of high quality with minimal credit risks. The Fund may invest in variable
and floating rate instruments even if they carry stated maturities in excess of
397 days, upon certain conditions contained in rules and regulations issued by
the Securities and Exchange Commission under the Investment Company Act of
1940, but will do so only if there is a secondary market for such instruments
or if they carry demand features, permissible under rules of the Commission for
money market funds, to recover the full principal amount thereof upon specified
notice at par, or both.
The Board of Trustees, pursuant to Rule 2a-7, has established procedures de-
signed to stabilize, to the extent reasonably possible, the Fund's price per
share as computed for the purpose of sales and redemptions at $1.00. Such pro-
cedures will include review of the Fund's portfolio holdings by the Board of
Trustees, at such intervals as it may deem appropriate, to determine whether
the net asset value calculated by using available market quotations or market
equivalents deviates from $1.00 per share based on amortized cost. Market quo-
tations and market equivalents used in such review may be obtained from a pric-
ing agent approved by the Board of Trustees. The Board has selected Nuveen Ad-
visory to act as pricing agent, but in the future may select an independent
pricing service to perform this function. In serving as pricing agent, Nuveen
Advisory will follow guidelines adopted by the Board, and the Board will moni-
tor Nuveen Advisory to see that the guidelines are followed. The pricing agent
will value the Fund's investment based on methods which include consideration
of yield or prices of municipal obligations of comparable quality, coupon, ma-
turity, and type; indications as to values from dealers; and general market
conditions. The pricing agent may employ electronic data processing techniques
and/or a matrix system to determine valuations. The extent of any deviation be-
tween the Fund's net asset value based on the pricing agent's market valuation
and $1.00 per share based on amortized cost will be examined by the Board of
Trustees. If such deviation exceeds 1/2 of 1%, the Board of Trustees will
promptly consider what action, if any, will be initiated. In the event the
Board of Trustees determines that a deviation exists which may result in mate-
rial dilution or other
S-18
<PAGE>
unfair results to investors or existing shareholders, it has agreed to take
such corrective action as it regards as necessary and appropriate, including
the sale of portfolio instruments prior to maturity to realize capital gains or
losses or to shorten average portfolio maturity.
TAX MATTERS
Federal Income Tax Matters
The following discussion of federal income tax matters is based upon the advice
of Morgan, Lewis & Bockius LLP, Washington, D.C., counsel to the Fund.
As described in the Prospectus, the Fund intends to qualify, as it has in prior
years, under Subchapter M of the Internal Revenue Code of 1986, as amended,
(the "Code"), for tax treatment as a regulated investment company. In order to
qualify as a regulated investment company, the Fund must satisfy certain
requirements relating to the source of its income, diversification of its
assets, and distributions of its income to shareholders. First, the Fund must
derive at least 90% of its annual gross income (including tax-exempt interest)
from dividends, interest, payments with respect to securities loans, gains from
the sale or other disposition of stock or securities, foreign currencies or
other income (including but not limited to gains from options and futures)
derived with respect to its business of investing in such stock or securities
(the "90% gross income test"). Second, the Fund must diversify its holdings so
that, at the close of each quarter of its taxable year, (i) at least 50% of the
value of its total assets is comprised of cash, cash items, United States
Government securities, securities of other regulated investment companies and
other securities limited in respect of any one issuer to an amount not greater
in value than 5% of the value of the Fund's total assets and to not more than
10% of the outstanding voting securities of such issuer, and (ii) not more than
25% of the value of the total assets is invested in the securities of any one
issuer (other than United States Government securities and securities of other
regulated investment companies) or two or more issuers controlled by the Fund
and engaged in the same, similar or related trades or businesses.
As a regulated investment company, the Fund will not be subject to federal in-
come tax on the portion of its net investment income and net realized gain that
is currently distributed to shareholders in any taxable year for which the Fund
distributes at least 90% of the sum of (i) its "investment company taxable in-
come" (which includes dividends, taxable interest, taxable original issue dis-
count and market discount income, income from securities lending, net short-
term capital gain in excess of long-term capital loss, and any other taxable
income other than "net capital gain" (the excess of its net long-term capital
gain over its short-term capital loss) and is reduced by deductible expenses)
and (ii) its "net tax-exempt interest" (the excess of its gross tax-exempt in-
terest income over certain disallowed deductions).
The Fund also intends to satisfy conditions which will enable it to designate
certain distributions, as Exempt Interest Dividends. Shareholders receiving
Exempt Interest Dividends will not be subject to regular federal income tax on
the amount of such dividends.
S-19
<PAGE>
Distributions by the Fund of net interest income received from certain taxable
investments (such as certificates of deposit, commercial paper and obligations
of the United States Government, its agencies and instrumentalities) and net
short-term capital gains realized by the Fund, if any, will be taxable to
shareholders as ordinary income whether received in cash or additional shares.
If the Fund purchases a security at a market discount, any gain realized by the
Fund upon the sale or redemption of the security will be treated as taxable
interest income to the extent such gain does not exceed the market discount,
and any gain realized in excess of the market discount will be treated as a
capital gain. Any net long-term capital gains realized by the Fund and
distributed to shareholders in cash or in additional shares will be taxable to
shareholders as long-term capital gains regardless of the length of time
investors have owned shares of the Fund. The Fund does not expect to realize
significant long-term capital gains. Because the taxable portion of the Fund's
investment income consists primarily of interest, none of its dividends,
whether or not treated as exempt-interest dividends, is expected to qualify
under the Internal Revenue Code for the dividends received deductions for
corporations.
If the Fund has both tax-exempt and taxable income, it will use the "average
annual" method for determining the designated percentage that is taxable income
and designate the use of such method within 60 days after the end of the Fund's
taxable year. Under this method, one designated percentage is applied uniformly
to all distributions made during the Fund's taxable year. The percentage of in-
come designated as tax-exempt for any particular distribution may be substan-
tially different from the percentage of the Fund's income that was tax-exempt
during the period covered by the distribution.
Although dividends generally will be treated as distributed when paid, divi-
dends declared in October, November or December, payable to shareholders of
record on a specified date in one of those months and paid during the following
January, will be treated as having been distributed by the Fund (and received
by the shareholders) on December 31.
The redemption or exchange of the shares of the Fund is not expected to result
in capital gain or loss to the shareholders because the Fund's net asset value
is expected to remain constant at $1.00 per share. To the extent that the
Fund's net asset value is greater or less than $1.00 per share, redemptions or
exchanges may result in capital gain or loss to the shareholder.
In order to avoid a 4% federal excise tax, the Fund must distribute or be
deemed to have distributed by December 31 of each calendar year at least 98% of
its taxable ordinary income for such year, at least
98% of the excess of its realized capital gains over its realized capital
losses (generally computed on the basis of the one-year period ending on Octo-
ber 31 of such year) and 100% of any taxable ordinary income and the excess of
realized capital gains over realized capital losses for the prior year that was
not distributed during such year and on which the Fund paid no federal income
tax. The Fund intends to make timely distributions in compliance with these re-
quirements and consequently it is anticipated that it generally will not be re-
quired to pay the excise tax.
If in any year the Fund should fail to qualify under Subchapter M for tax
treatment as a regulated investment company, the Fund would incur a regular
corporate federal income tax upon its income for that year (other than interest
income from tax-exempt securities) and distributions to its shareholders out of
net interest income from tax-exempt securities or other investments, or out of
net capital gains,
S-20
<PAGE>
would be taxable to shareholders as ordinary dividend income for federal income
tax purposes to the extent of the Fund's available earnings and profits.
The Fund may invest in the type of private activity bonds the interest on which
is not federally tax-exempt to persons who are "substantial users" of the fa-
cilities financed by such bonds or "related persons" of such "substantial us-
ers." Accordingly, the Fund may not be an appropriate investment for a share-
holder who is considered either a "substantial user" or a "related person"
within the meaning of the Code. In general, a "substantial user" of a facility
financed from the proceeds of private activity bonds includes a "non-exempt
person who regularly uses a part of such facility in his trade or business."
"Related persons" are in general defined to include persons among whom there
exists a relationship, either by family or business, which would result in a
disallowance of losses in transactions among them under various provisions of
the Code (or if they are members of the same controlled group of corporations
under the Code). This includes a partnership and each of its partners (includ-
ing their spouses and minor children) and an S corporation and each of its
shareholders (and their spouses and minor children). Various combinations of
these relationships may also constitute "related persons" under the Code. For
additional information, investors should consult their tax advisers before in-
vesting in the Fund.
Federal tax law imposes an alternative minimum tax with respect to both corpo-
rations and individuals. Interest on certain securities, such as bonds issued
to make loans for housing purposes or to private entities (but not for certain
tax-exempt organizations such as universities and non-profit hospitals), is in-
cluded as an item of tax preference in determining the amount of a taxpayer's
alternative minimum taxable income. To the extent that the Fund receives income
from securities subject to the alternative minimum tax, a portion of the divi-
dends paid by it, although otherwise exempt from federal income tax, will be
taxable to shareholders to the extent that their tax liability is determined
under the alternative minimum tax regime. The Fund will annually supply share-
holders with a report indicating the percentage of Fund income attributable to
securities subject to the federal alternative minimum tax.
In addition, the alternative minimum taxable income for corporations is in-
creased by 75% of the difference between an alternative measure of income ("ad-
justed current earnings") and the amount otherwise determined to be the alter-
native minimum taxable income. Interest on all securities, and therefore all
distributions by the Fund that would otherwise be tax-exempt, is included in
calculating a corporation's adjusted current earnings.
Individuals whose provisional income exceeds a base amount will be subject to
federal income tax on up to one-half of their social security or railroad re-
tirement benefits. Provisional income currently includes adjusted gross income,
one-half of social security benefits and tax-exempt interest, including exempt-
interest dividends from the Fund. Individuals whose modified income exceeds an
adjusted base amount are required to include in gross income up to 85% of their
social security or railroad retirement benefits.
The Code provides that interest on indebtedness incurred or continued to pur-
chase or carry shares of the Fund is not deductible. Under rules used by the
IRS for determining when borrowed funds are
S-21
<PAGE>
considered used for the purpose of purchasing or carrying particular assets,
the purchase of shares of the Fund may be considered to have been made with
borrowed funds even though such funds are not directly traceable to the pur-
chase of shares.
The Fund is required in certain circumstances to withhold 31% of taxable divi-
dends and certain other payments paid to non-corporate holders of shares who
have not furnished to the Fund their correct taxpayer identification number (in
the case of individuals, their social security number) and certain certifi-
cates, or who are otherwise subject to back-up withholding.
The foregoing is a general and abbreviated summary of the provisions of the
Code and Treasury Regulations presently in effect as they directly govern the
taxation of the Fund and its shareholders. For complete provisions, reference
should be made to the pertinent Code sections and Treasury Regulations. The
Code and Treasury Regulations are subject to change by legislative or adminis-
trative action, and any such change may be retroactive with respect to Fund
transactions. Shareholders are advised to consult their own tax advisers for
more detailed information concerning the federal taxation of the Fund and the
income tax consequences to its shareholders.
State Tax Matters
The following is based upon the advice of Morgan, Lewis & Bockius LLP, Washing-
ton, D.C. counsel to the Fund, and assumes that the Fund will be qualified as a
regulated investment company under Subchapter M of the Code.
The exemption from federal income tax for distributions which are designated
Exempt Interest Dividends will not necessarily result in exemption under the
income or other tax laws of any state or local taxing authority. The laws of
the several states and local taxing authorities vary with respect to the taxa-
tion of such distributions, and shareholders of the Fund are advised to consult
their own tax advisers in that regard.
PERFORMANCE INFORMATION
The historical performance may be expressed in terms of "yield," "effective
yield" or "taxable equivalent yield." The Fund's "yield" refers to the rate of
income generated by an investment in the Fund over a specified seven-day peri-
od, expressed as an annualized figure. "Effective yield" is calculated simi-
larly except that, when annualized, the income earned by the investment is as-
sumed to be reinvested. Due to this compounding effect, the effective yield
will be slightly higher than the yield. Yield figures will fluctuate over time.
"Taxable equivalent yield" is the yield that a taxable investment would need to
generate in order to equal the Fund's yield on an after-tax basis for an in-
vestor in a stated tax bracket (normally assumed to be the bracket with the
highest marginal tax rate). A taxable equivalent yield quotation will be higher
than the yield or the effective yield quotations for the Fund. The Fund's yield
and effective yield for the seven-day period ended were % and
%, respectively. These various measures of performance are described below.
S-22
<PAGE>
Yield is computed in accordance with a standard method prescribed by rules of
the Securities and Exchange Commission. Under that method, current yield is
based on a seven-day period and is computed as follows: The Fund's net invest-
ment income per share for the period is divided by the price per share (ex-
pected to remain constant at $1.00) at the beginning of the period, the result
(the "base period return") is divided by 7 and multiplied by 365, and the re-
sulting figure is carried to the nearest hundredth of one percent. For the pur-
pose of this calculation, the Fund's net investment income per share includes
its accrued interest income plus or minus amortized purchase discount or pre-
mium less accrued expenses, but does not include realized capital gains or
losses or unrealized appreciation or depreciation of investments.
The Fund's effective yield is calculated by taking the base period return (com-
puted as described above) and calculating the effect of assumed compounding.
The formula for effective yield is: (base period return + 1) 365/7 - 1.
Taxable equivalent yield is computed by dividing that portion of the fund's
yield which is tax-exempt by 1 minus the stated federal income tax rate and
adding the result to that portion, if any, of the yield of the fund that is not
tax-exempt. Based upon (1) a 1999 federal income tax of , and (2) the
yield for the fund as described above for the seven-day period ended February
28, 1999, the taxable equivalent yield for the fund for that period was %.
The Fund's yield will fluctuate, and the publication of annualized yield quota-
tions is not a representation of what an investment in the Fund will actually
yield for any given future period. Actual yields will depend not only on
changes in interest rates on money market instruments during the period in
question, but also on such matters as the expenses of the Fund.
In reports or other communications to shareholders or in advertising and sales
literature, the Fund may compare its performance to that of other money market
mutual funds tracked by Lipper Analytical Services, Inc. ("Lipper"), by
Donoghue's Money Fund Report ("Donoghue's") or similar services or by financial
publications such as Barron's, Changing Times, Forbes and Money Magazine. Per-
formance comparisons by these indexes, services or publications may rank mutual
funds over different periods of time by means of aggregate, average, year-by-
year or other types of performance figures. Lipper performance calculations in-
clude the reinvestment of all capital gain and income dividends for the periods
covered by the calculations. As reported by Donoghue's, all investment results
represent total return (annualized results for the period net of management
fees and expenses) and one year investment results are effective annual yields
assuming reinvestment of dividends.
A comparison of tax-exempt and taxable equivalent yields is one element to con-
sider in making an investment decision. The Fund may from time to time in its
advertising and sales materials compare its then current yields as of a recent
date with the yields on taxable investments such as corporate or U.S. Govern-
ment bonds and bank CDs or money market accounts, each of which has investment
characteristics that may differ from those of the Fund. U.S. Government bonds,
for example, are backed by the full faith and credit of the U.S. Government,
and bank CDs and money market accounts are generally shorter term investments
insured by an agency of the federal government. Bank money
S-23
<PAGE>
market accounts and money market funds provide stability of principal but pay
interest at rates which vary with the condition of the short-term taxable debt
market.
The following table shows the effects for individuals of federal income taxes
on the amount that those subject to a given tax rate would have to put into a
tax-free investment in order to generate the same after-tax income as a taxable
investment.*
Read down to find the amount of a tax-free investment at the specified rate
that would provide the same after-tax income as a $50,000 taxable invest-
ment at the stated taxable rate.
<TABLE>
<CAPTION>
2.00% 2.50% 3.00% 3.50% 4.00% 4.50% 5.00%
Taxable Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
3.00% $ 51,750 $41,400 $34,500 $29,571 $25,875 $23,000 $20,700
- -----------------------------------------------------------------------
4.00% $ 69,000 $55,200 $46,000 $39,429 $34,500 $30,667 $27,600
- -----------------------------------------------------------------------
5.00% $ 86,250 $69,000 $57,500 $49,286 $43,125 $38,333 $34,500
- -----------------------------------------------------------------------
6.00% $103,500 $82,800 $69,000 $59,143 $51,750 $46,000 $41,400
- -----------------------------------------------------------------------
7.00% $120,750 $96,600 $80,500 $69,000 $60,375 $53,667 $48,300
- -----------------------------------------------------------------------
</TABLE>
*The dollar amounts in the table reflect a 31% federal income tax rate.
The table is for illustrative purposes only and is not intended to predict the
actual return you might earn on your investment. The Fund occasionally may ad-
vertise its performance in similar tables using a different current tax rate
than that shown here. The tax rate shown here may be higher or lower than your
actual tax rate; a higher tax rate would tend to make the dollar amounts in the
table lower, while a lower tax rate would make the amounts higher. You should
consult your tax adviser to determine your actual tax rate.
Taxable Equivalent Yield Tables
The following tables show the effects for individuals of federal income taxes
on what you would have to earn on a taxable investment to equal a given tax-
free yield. These tables are for illustrative purposes only and are not in-
tended to predict the actual return you might earn on a Fund investment. The
Fund occasionally may advertise its performance in similar tables using other
current tax rates than those shown here. The tax rates used in these tables
have been rounded to the nearest one-half of one percent. They are based upon
published 1999 marginal federal tax rates and do not take into account changes
in tax rates that are proposed from time to time. A taxpayer's marginal tax
rate is affected by both his taxable income and his adjusted gross income. The
tables assume taxpayers are not subject to any alternative minimum taxes and
deduct any state income taxes paid on their federal income tax return. They re-
flect the effect of the current federal tax limitations on itemized deductions
and personal exemptions, which were designed to phase out certain benefits of
these deductions for higher income taxpayers. These limitations are subject to
certain maximums, which depend on the number of exemptions claimed and the to-
tal amount of the taxpayer's itemized deductions. For example, the limitation
on itemized deductions will not cause a taxpayer to lose more than 80% of his
allowable itemized deductions with certain exceptions. The tax rates shown here
may be higher or lower than your actual tax rate.
S-24
<PAGE>
Marginal tax rates for joint taxpayers with four personal exemptions
<TABLE>
<CAPTION>
Federal Tax-Free Yield
Federal Adjusted Federal 2.00% 2.50% 3.00% 3.50% 4.00% 4.50% 5.00%
Taxable Gross Tax -----------------------------------------------------------------------
Income Income Ratio Taxable Equivalent Yield
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0-
42,350 $ 0-124,500 15.0% 2.35 2.94 3.53 4.12 4.71 5.29 5.88
42,350-
102,300 0-124,500 28.0 2.78 3.47 4.17 4.86 5.58 6.25 6.94
124,500-186,800 29.0 2.82 3.52 4.23 4.93 5.63 6.34 7.04
102,300-
155,050 0-124,500 31.0 2.90 3.62 4.35 5.07 5.80 6.52 7.25
124,500-186,800 32.0 2.94 3.68 4.41 5.15 5.88 6.62 7.35
186,800-309,300 34.5 3.05 3.82 4.58 5.34 6.11 6.87 7.63
155,950-
278,450 124,500-186,800 37.0 3.17 3.97 4.78 5.56 6.35 7.14 7.94
186,800-309,300 40.0 3.33 4.17 5.00 5.83 6.67 7.50 8.33
Over 309,300 37.0 3.17 3.97 4.76 5.56 6.35 7.14 7.94
Over
278,450 186,800-309,300 44.0 3.57 4.46 5.36 6.25 7.14 8.04 8.93
Over 309,300 41.0 3.39 4.24 6.06 5.93 6.78 7.63 8.47
- -----------------------------------------------------------------------------------------------------------
</TABLE>
Marginal tax rates for single taxpayers with one personal exemption
<TABLE>
<CAPTION>
Federal Combined
Federal Adjusted State Tax-Free Yield
Taxable Gross and 2.00% 2.50% 3.00% 3.50% 4.00% 4.50% 5.00%
Income Income Federal --------------------------------------------------------------------
Tax Rate Taxable Equivalent Yield
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0-
25,350 $ 0-124,500 15.0% 2.35 2.94 3.53 4.12 4.71 5.29 5.88
25,350-
61,400 0-124,500 28.0 2.78 3.47 4.17 4.96 5.56 6.25 6.94
61,400-
128,100 0-124,500 31.0 2.90 3.62 4.35 5.07 5.80 6.52 7.25
124,500-247,000 32.5 2.96 3.70 4.44 5.19 5.93 6.67 7.41
128,100-
278,450 124,500-247,000 38.0 3.23 4.03 4.84 5.65 6.45 7.26 8.06
Over 247,000 37.0 3.17 3.97 4.76 5.58 6.35 7.14 7.94
Over
278,450 Over 247,000 41.0 3.38 4.24 5.08 5.93 6.78 7.63 8.47
- ----------------------------------------------------------------------------------------------------------
</TABLE>
ADDITIONAL INFORMATION ABOUT PURCHASES AND SALES
Exchange Privileges
You may exchange shares of the Fund for the appropriate class of shares of any
other open-end management investment company with reciprocal exchange privi-
leges advised by Nuveen Advisory (the "Nuveen Funds"), into an identically reg-
istered account, provided that the Nuveen Fund into which shares are to be ex-
changed is offered in the shareholder's state of residence and that the shares
to be exchanged have been held by the shareholder for a period of at least 15
days. You may exchange Fund shares by calling (800) 257-8787 or by mailing your
written request to our Transfer Agent. Shares of Nuveen Funds purchased subject
to a front-end sales charge may be exchanged for shares of the Fund or any
other Nuveen Fund at the next determined net asset value without any front-end
sales charge. No CDSC otherwise applicable will be assessed on an exchange, and
the holding period of your investment will be carried over to the new fund for
purposes of determining any future CDSC. You may exchange Class B shares for
shares of a Nuveen money market fund. Shares of any Nuveen Fund purchased
through dividend reinvestment or through reinvestment of Nuveen Unit Trust dis-
tributions (and any dividends thereon) may be exchanged for Class A shares of
any Nuveen Fund without a front-end sales
S-25
<PAGE>
charge. Exchanges of shares with respect to which no front-end sales charge has
been paid will be made at the public offering price, which may include a front-
end sales charge, unless a front-end sales charge has previously been paid on
the investment represented by the exchanged shares (i.e., the shares to be ex-
changed were originally issued in exchange for shares on which a front-end
sales charge was paid), in which case the exchange will be made at net asset
value. Because certain other Nuveen Funds may determine net asset value and
therefore honor purchase or redemption requests on days when the Fund does not
(generally, Martin Luther King's Birthday, Columbus Day and Veterans Day), ex-
changes of shares of one of those funds for shares of the Fund may not be ef-
fected on such days.
The total value of shares being exchanged must at least equal the minimum in-
vestment requirement of the Nuveen Fund into which they are being exchanged.
Exchanges are made based on the relative dollar values of the shares involved
in the exchange, and will be effected by redemption of shares of the Nuveen
Fund held and purchase of the shares of the other Nuveen Fund. For federal in-
come tax purposes, any such exchange constitutes a sale and purchase of shares
and may result in capital gain or loss. Before exercising any exchange, you
should obtain the Prospectus for the Nuveen Fund into which shares are to be
exchanged and read it carefully. If the registration of the account for the
Fund you are purchasing is not exactly the same as that of the Fund account
from which the exchange is made, written instructions from all holders of the
account from which the exchange is being made must be received, with signatures
guaranteed by a member of an approved Medallion Guarantee Program or in such
other manner as may be acceptable to the Fund. The exchange privilege may be
modified or discontinued at any time. If you do not wish to have telephone ex-
change privileges, you must indicate this in the "Telephone Services" section
of your Account Application or otherwise notify the Fund in writing of your
desire.
Additional Information
An account will be maintained for each shareholder of record in the Fund by our
Transfer Agent. Share certificates will be issued only upon written request of
the shareholder to our Transfer Agent. No certificates are issued for frac-
tional shares. The Fund reserves the right to reject any purchase order and to
waive or increase minimum investment requirements.
Confirmations of each purchase and redemption order as well as monthly state-
ments are sent to every shareholder. Master accounts also receive a monthly
summary report setting forth the share balance and dividends earned for the
month for each sub-account established under that master account.
To assist those institutions performing their own-sub-accounting, same day in-
formation as to the Fund's daily per share income to seven decimal places and
the one-day yield to four decimal places are normally available by 3:30 p.m.,
Eastern Time.
A change in registration or transfer of shares held in the name of a
broker/dealer can only be effected by an order in good form from the
broker/dealer acting on behalf of the investor. Broker/dealers are encouraged
to open single master accounts. However, some broker/dealers may wish to use
our Transfer Agent's sub-accounting system to minimize their internal record-
keeping requirements. A broker/dealer or other investor requesting shareholder
servicing or accounting other than the master
S-26
<PAGE>
account or subaccounting service offered by the Fund will be required to enter
into a separate agreement with the agent for these services for a fee to be de-
termined in accordance with the level of services to be furnished.
Banks and other organizations through which investors may purchase shares of
the Fund may impose charges in connection with purchase orders. Investors
should contact their institutions directly to determine what charges, if any,
may be imposed.
Subject to the rules of the SEC, the Fund reserves the right to suspend the
continuous offering of the shares at any time, but such suspension shall not
affect the shareholder's right of redemption as described below. The Fund also
reserves the right to reject any purchase order and to waive or increase mini-
mum investment requirements.
Telephone Redemption via Fund Direct
To redeem shares held in non-certificate form by telephone with the redemption
proceeds paid via Fund Direct-Electronic Funds Transfer, you must complete the
Telephone Services section of the enclosed Application Form and return it to
Nuveen or our Transfer Agent. If you did not authorize Telephone Redemption via
Fund Direct when you opened your account, you may do so by sending a written
request to the Fund signed by each account owner with signatures guaranteed by
a member of an approved Medallion Guarantee Program or in such other manner as
may be acceptable to the Fund. Proceeds of share redemptions made by Fund Di-
rect will be transferred only to the commercial bank account specified by the
shareholder. Redemption proceeds may be delayed one additional business day if
the Federal Reserve Bank of Boston or the Federal Reserve Bank of New York is
closed on the day the redemption proceeds would ordinarily be wired.
If you have authorized Telephone Redemption via Fund Direct, you can take ad-
vantage of two methods of telephone redemption: regular telephone redemption
and expedited telephone redemption. You may make regular Fund Direct redemption
requests by calling Nuveen at (800) 257-8787. If a regular telephone redemption
request is received prior to 4:00 p.m. Eastern Time, the shares to be redeemed
earn income on the day the request is made, and the redemption is effected on
the following business day. For regular redemption requests received after 4:00
p.m. Eastern Time, the shares to be redeemed earn income through the following
business day, and the redemption is effected on the second business day follow-
ing the request. For all regular redemptions, you will typically receive your
Funds within three business days after your redemption is effected. You may
make expedited telephone redemption requests to redeem shares that are worth at
least $1,000 by calling Nuveen at (800) 257-8787. If an expedited redemption
request is received by 12:00 noon Eastern Time, the shares to be redeemed do
not earn income on that day, but the redemption is effected, and you will nor-
mally receive your Funds, on that day. If an expedited redemption request is
received after 12:00 noon Eastern Time, the shares to be redeemed earn income
on the day the request is received. The redemption is effected, and you will
normally receive your Funds, on the next business day following the request.
The Fund reserves the right to charge a fee for expedited redemption requests.
S-27
<PAGE>
How to Change Authorized Redemption Instructions
In order to establish multiple accounts, or to change the account or accounts
designated to receive redemption proceeds, a written request specifying the
change must be sent to Nuveen. This request must be signed by each account
owner with signatures guaranteed by a member of an approved Medallion Guarantee
Program or in such other manner as may be acceptable to the Fund. Further docu-
mentation may be required from corporations, executors, trustees or personal
representatives.
The Fund reserves the right to refuse a telephone redemption and, at its op-
tion, may limit the timing, amount or frequency of these redemptions. This pro-
cedure may be modified or terminated at any time, on 30 days' notice, by the
Fund. The Fund, the transfer agent and Nuveen will not be liable for following
telephone instructions reasonably believed to be genuine.
Redemption in Kind
The Fund has committed to pay in cash all redemption requests made by each
shareholder during any 90 day period up to the lesser of $250,000 or 1% of the
net asset value of the Fund at the beginning of such period. This commitment is
irrevocable without the prior approval of the SEC and is a fundamental policy
of the Fund which may not be changed without shareholder approval. In the case
of redemption requests in excess of such amounts, the Board of Directors re-
serves the right to have the Fund make payment in whole or in part in securi-
ties or other assets of the Fund in case of an emergency or any time a cash
distribution would impair the liquidity of the Fund to the detriment of the ex-
isting shareholders. In this event, the securities would be valued in the same
manner as the portfolio of the Fund is valued. If the recipient were to sell
such securities, he or she would incur brokerage charges.
Other Practices
The Fund may suspend the right of redemption or delay payment more than seven
days (a) during any period when the New York Stock Exchange is closed (other
than customary weekend and holiday closings), (b) when trading in the markets
the Fund normally utilizes is restricted, or an emergency exists as determined
by the SEC so that disposal of the Fund's investments or determination of its
net asset value is not reasonably practicable, or (c) for such other periods as
the SEC by order may permit for protection of the shareholders of the Fund.
The Fund has authorized certain brokers and firms to accept purchase and re-
demption orders on its behalf. The Fund will consider an order to be "received"
when such a broker or firm accepts the order from its customer.
In addition to the types of compensation to dealers to promote sales of Fund
shares that are described in the prospectus, Nuveen may from time to time make
additional reallowances only to certain authorized dealers who sell or are ex-
pected to sell certain minimum amounts of shares of the Nuveen Mutual Funds
during specified time periods.
S-28
<PAGE>
SERVICE PLAN
The Fund has adopted a Service Plan pursuant to Rule 12b-1 under the 1940 Act.
The Plan was adopted by the Board of Trustees, including a majority of trustees
who are not interested persons and who have no direct or indirect financial in-
terest in the Plan, and approved by shareholders.
Under the Plan, the Fund pays Nuveen an annual fee according to the schedule
below. Nuveen will pay this fee to authorized dealers of record, including
Nuveen, for providing ongoing services to the Fund and its shareholders. Such
services generally include establishing and maintaining shareholder accounts,
processing purchase and redemption orders, arranging for bank wires and answer-
ing shareholder inquiries. Under the Plan, the Fund pays the entire amount of
the fees. Nuveen may, in its discretion and from its own resources, pay certain
financial service firms additional amounts for services rendered to sharehold-
ers.
The annual fee under the Plan is computed as follows:
<TABLE>
<CAPTION>
Net Assets of Serviced
Accounts Fee
- -------------------------------
<S> <C>
Less than $2 million .10%
$2 million to $5 million .15%
$5 million to $10 million .20%
$10 million and over .25%
- -------------------------------
</TABLE>
Under the Plan, the Controller or Treasurer of the fund will report quarterly
to the Board of Trustees for its review amounts expended for distribution serv-
ices. The Plan, may be terminated at any time, without the payment of any pen-
alty, by a vote of a majority of the trustees who are not "interested persons"
and who have no direct or indirect financial interest in the Plan or any re-
lated agreements or by vote of a majority of the outstanding voting securities
of the Fund. The Plan may be renewed from year to year if approved at least an-
nually by a vote of the Board of Trustees and a vote of the non-interested
trustees who have no direct or indirect financial interest in the Plan or the
related service agreements cast in person at a meeting called for the purpose
of voting on the Plan. The Plan may be continued only if the Trustees who vote
to approve such continuance conclude, in the exercise of reasonable business
judgment and in light of their fiduciary duties under applicable law, that
there is a reasonable likelihood that the Plan will benefit the Fund and its
shareholders. The Plan is intended to benefit the fund by promoting the sale of
Fund shares, which in turn leads to economies of scale and helps assure the
continued viability of the Fund. The Plan may not be amended to increase mate-
rially the cost which the Fund may bear under the Plan without shareholder ap-
proval, and any other material amendments of the Plan must be approved by the
non-interested trustees by a vote cast in person at a meeting called for the
purpose of considering such amendments. During the continuance of the Plan, as
required by the Rule, the selection and nomination of the non-interested trust-
ees of the Fund will be committed to the discretion of the non-interested
trustees then in office. Nuveen's compensation under the Plan is not based on
Nuveen's expenses incurred in providing services to shareholders.
No trustee of the Fund and no "interested" person of the Fund has any direct or
indirect financial interest in the Plan or any agreement related to the Plan.
S-29
<PAGE>
For the fiscal year ended February 28, 1999, the Fund, as its predecessor,
paid 12b-1 fees in the amount of $115,000.
OTHER INFORMATION REGARDING SHARES OF THE FUND
Shareholders should note that when a Fund dividend check has been returned to
the sender by the post office after repeated mailings, the shareholder account
will thereafter be registered for automatic reinvestment of dividends and thus
the dividend check and future dividend checks will be reinvested in additional
Fund shares. Shareholders are reminded that they need to advise the Funds
promptly in writing of any change in address.
The Glass-Steagall Act and other applicable laws, among other things, may
limit banks from engaging in the business of underwriting, selling or distrib-
uting securities. Since the only functions of banks who may be engaged as
service organizations is to perform administrative shareholder servicing func-
tions, the Fund believes that such laws should not preclude a bank from acting
as a service organization. However, future changes in either federal or state
statutes or regulations relating to the permissible activities of banks and
their subsidiaries or affiliates, as well as judicial or administrative deci-
sions or interpretations of statutes or regulations, could prevent a bank from
continuing to perform all or a part of its shareholder servicing activities.
If a bank were prohibited from so acting, its shareholder customers would be
permitted to remain shareholders of the Fund and alternative means for contin-
uing the servicing of such shareholders would be sought.
Nuveen serves as the principal underwriter of the shares of the Fund pursuant
to a "best efforts" arrangement as provided by a distribution agreement with
the Fund, dated February 1, 1987 and last renewed on July 31, 1998 ("Distribu-
tion Agreement"). Pursuant to the Distribution Agreement, the Fund, appointed
Nuveen to be its agent for the distribution of the Fund's shares on a continu-
ous offering basis. Nuveen sells shares to or through brokers, dealers, banks
or other qualified financial intermediaries (collectively referred to as
"Dealers"), or others, in a manner consistent with the Fund's then effective
registration statement. Pursuant to the Distribution Agreement, Nuveen, at its
own expense, finances certain activities incident to the sale and distribution
of the Fund's shares, including printing and distributing of prospectuses and
Statements of Additional Information to other than existing shareholders, the
printing and distributing of sales literature, advertising and payment of com-
pensation and giving of concessions to dealers. Expenses incurred in register-
ing the Fund and its shares under federal and state securities laws are paid
by the Fund.
To help advisers and investors better understand and more efficiently use an
investment in the Fund to reach their investment goals, the Fund and its spon-
sor, Nuveen, may advertise and create specific investment programs and sys-
tems. For example, such activities may include presenting information on how
to use an investment in the Fund, alone or in combination with an investment
in other mutual funds or unit investment trusts sponsored by Nuveen, to accu-
mulate assets for future education needs or periodic payments such as insur-
ance premiums. The Fund and its sponsor may produce software or additional
sales literature to promote the advantages of using the Fund to meet these and
other specific investor needs.
S-30
<PAGE>
Statement of Additional Information
June 10, 1999
Nuveen Money Market Trust
333 West Wacker Drive
Chicago, Illinois 60606
Nuveen Money Market Trust
NUVEEN CALIFORNIA TAX-EXEMPT MONEY MARKET FUND
This Statement of Additional Information is not a prospectus. This Statement of
Additional Information should be read in conjunction with the Prospectus of the
Nuveen California Tax-Exempt Money Market Fund (the "Fund") dated June 10,
1999. The Prospectus may be obtained without charge from certain securities
representatives, banks, and other financial institutions that have entered into
sales agreements with John Nuveen & Co. Incorporated, or from the Fund by mail-
ing a written request to the Fund, c/o. John Nuveen & Co. Incorporated
("Nuveen"), 333 West Wacker Drive, Chicago, Illinois 60606 or by calling (800)
257-8787.
<TABLE>
<S> <C>
Table of Contents Page
- ------------------------------------------------------------
Investment Policies and Investment Portfolio S-2
- ------------------------------------------------------------
Management S-20
- ------------------------------------------------------------
Investment Adviser and Investment Management Agreement S-24
- ------------------------------------------------------------
Portfolio Transactions S-25
- ------------------------------------------------------------
Net Asset Value S-26
- ------------------------------------------------------------
Tax Matters S-27
- ------------------------------------------------------------
Performance Information S-31
- ------------------------------------------------------------
Additional Information About Purchases and Sales S-36
- ------------------------------------------------------------
Service Plan S-39
- ------------------------------------------------------------
Other Information Regarding Shares of the Fund S-40
- ------------------------------------------------------------
</TABLE>
Principal Underwriter
John Nuveen & Co. Investment Adviser Independent Public
Incorporated Nuveen Advisory Accountants
Corp., for the Fund
Chicago: Subsidiary of John Arthur Andersen LLP
333 West Wacker Drive Nuveen & 33 West Monroe Street
Chicago, Illinois Co. Incorporated Chicago, Illinois
60606 333 West Wacker Drive 60603
(312) 917-7700 Chicago, Illinois
60606 Transfer and Dividend
New York: Disbursing Agent
10 East 50th Street Custodian Chase Global Funds
New York, New York The Chase Manhattan Services Company
10022 Bank P.O. Box 5186
(212) 207-2000 4 New York Plaza New York, NY 10274
New York, New York 10004
<PAGE>
INVESTMENT POLICIES AND INVESTMENT PORTFOLIO
Fundamental Policies
The investment objective and certain fundamental investment policies of the
Fund is described in the Prospectus. The Fund, as a fundamental policy, may
not, without the approval of the holders of a majority of the shares of the
Fund:
(1) Invest in securities other than Municipal Obligations and temporary invest-
ments, as those terms are defined in the Prospectuses, and in standby commit-
ments with respect to Municipal Obligations;
(2) Invest more than 5% of its total assets in securities of any one issuer,
except that this limitation shall not apply to securities of the United States
government, its agencies and instrumentalities or to the investment of 25% of
such Fund's assets;
(3) Borrow money, except from banks for temporary or emergency purposes and not
for investment purposes and then only in an amount not exceeding (a) 10% of the
value of its total assets at the time of borrowing or (b) one-third of the
value of the Fund's total assets including the amount borrowed, in order to
meet redemption requests which might otherwise require the untimely disposition
of securities. While any such borrowings exceed 5% of such Fund's total assets,
no additional purchases of investment securities will be made by such Fund. If
due to market fluctuations or other reasons, the value of the Fund's assets
falls below 300% of its borrowings, the Fund will reduce its borrowings within
3 business days. To do this, the Fund may have to sell a portion of its invest-
ments at a time when it may be disadvantageous to do so;
(4) Pledge, mortgage or hypothecate its assets, except that, to secure
borrowings permitted by subparagraph (3) above, it may pledge securities having
a market value at the time of pledge not exceeding 10% of the value of the
Fund's total assets;
(5) Issue senior securities as defined in the Investment Company Act of 1940,
except to the extent such issuance might be involved with respect to borrowings
described under item (3) above.
(6) Underwrite any issue of securities, except to the extent that the purchase
of Municipal Obligations in accordance with its investment objective, policies
and limitations, may be deemed to be an underwriting;
(7) Purchase or sell real estate, but this shall not prevent the Fund from in-
vesting in Municipal Obligations secured by real estate or interests therein or
foreclosing upon and selling such security;
(8) Purchase or sell commodities or commodities contracts or oil, gas or other
mineral exploration or development programs.
(9) Make loans, other than by entering into repurchase agreements and through
the purchase of Municipal Obligations or temporary investments in accordance
with its investment objective, policies and limitations;
(10) Make short sales of securities or purchase any securities on margin, ex-
cept for such short-term credits as are necessary for the clearance of transac-
tions;
(11) Write or purchase put or call options, except to the extent that the pur-
chase of a stand-by commitment may be considered the purchase of a put.
S-2
<PAGE>
(12) Invest more than 25% of its total assets in securities of issuers in any
one industry; provided, however, that such limitations shall not be applicable
to Municipal Obligations issued by governments or political subdivisions of
governments, and obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities;
(13) Invest more than 10% of its total assets in repurchase agreements maturing
in more than seven days, "illiquid" securities (such as non-negotiable CDs) and
securities without readily available market quotations;
For the purpose of applying the limitations set forth in paragraph (2) above,
an issuer shall be deemed the sole issuer of a security when its assets and
revenues are separate from other governmental entities and its securities are
backed only by its assets and revenues. Similarly, in the case of a non-govern-
mental user, such as an industrial corporation or a privately owned or operated
hospital, if the security is backed only by the assets and revenues of the non-
governmental user, then such non-governmental user would be deemed to be the
sole issuer. Where a security is also backed by the enforceable obligation of a
superior or unrelated governmental entity or other entity (other than a bond
insurer), it shall also be included in the computation of securities owned that
are issued by such governmental or other entity.
Where a security is guaranteed by a governmental entity or some other facility,
such as a bank guarantee or letter of credit, such a guarantee or letter of
credit would be considered a separate security and would be treated as an issue
of such government, other entity or bank. Where a security is insured by bond
insurance, it shall not be considered a security issued or guaranteed by the
insurer; instead the issuer of such security will be determined in accordance
with the principles set forth above. The foregoing restrictions do not limit
the percentage of the Fund's assets that may be invested in securities insured
by any single insurer. It is a fundamental policy of the Fund, which cannot be
changed without the approval of the holders of a majority of shares of such
Fund, that the Fund will not hold securities of a single bank, including secu-
rities backed by a letter of credit of such bank, if such holdings would exceed
10% of the total assets of the Fund.
The foregoing restrictions and limitations, as well as the Fund's policies as
to ratings of fund investments, will apply only at the time of purchase of se-
curities, and the percentage limitations will not be considered violated unless
an excess or deficiency occurs or exists immediately after and as a result of
an acquisition of securities, unless otherwise indicated.
The foregoing fundamental investment policies, together with the investment ob-
jective of the Fund, cannot be changed without approval by holders of a "major-
ity of the Fund's outstanding voting shares." As defined in the Investment Com-
pany Act of 1940, this means the vote of (i) 67% or more of the Fund's shares
present at a meeting, if the holders of more than 50% of the Fund's shares are
present or represented by proxy, or (ii) more than 50% of the Fund's shares,
whichever is less.
General Information
The Nuveen Money Market Trust (the "Trust") is an open-end management series
investment company organized as a Massachusetts business trust on January 15,
1999. The Fund (formerly, the Nuveen California Tax-Free Money Market Fund, the
Fund's predecessor, a series of the Nuveen California Tax-Free
S-3
<PAGE>
Fund, Inc.) is an open-end, diversified management investment company organized
as a series of the Trust. The Trust is an open-end management series company
under SEC Rule 18f-2. The Fund is a separate series issuing its own shares. The
Trust currently has five series. Certain matters under the Investment Company
Act of 1940 which must be submitted to a vote of the holders of the outstanding
voting securities of a series company shall not be deemed to have been effec-
tively acted upon unless approved by the holders of a majority of the outstand-
ing voting securities of each series affected by such matter.
The Trust is an entity of the type commonly known as a "Massachusetts business
trust." Under Massachusetts law, shareholders of a trust may, under certain
circumstances, be held personally liable as partners for its obligations. How-
ever, the Declaration of Trust contains an express disclaimer of shareholder
liability for acts or obligations of the Trust and requires that notice of this
disclaimer be given in each agreement, obligation or instrument entered into or
executed by the Trust or the Trustees. The Declaration of Trust further pro-
vides for indemnification out of the assets and property of the Trust for all
loss and expense of any shareholder personally liable for the obligations of
the Trust. Thus, the risk of a shareholder incurring financial loss on account
of shareholder liability is limited to circumstances in which both inadequate
insurance existed and the Trust itself were unable to meet its obligations. The
Trust believes the likelihood of these circumstances is remote.
Fund Shares represent an interest in the same portfolio of investments of the
Fund. Fund Shares have equal rights as to voting, redemption, dividends and
liquidation, and have exclusive voting rights with respect to any applicable
distribution or service plan. There are no conversion, preemptive or other sub-
scription rights. The Board of Trustees of the Fund have the right to establish
additional series and classes of shares in the future, to change those series
or classes and to determine the preferences, voting powers, rights and privi-
leges thereof.
Year 2000 Issues
The "Year 2000" problem refers to the fact that many computer programs use only
the last two digits of a year, and do not recognize a year that begins with
"20" instead of "19." If this problem is not corrected, computers could func-
tion improperly or not at all, which could affect the global economy. The SEC
has urged securities issuers to disclose the steps they are taking to correct
any Year 2000 problems.
The Fund invests primarily in money market instruments. If the issuers of these
instruments do not correct any Year 2000 problems in a timely manner, they
could experience problems in conducting their operations or in making payments
on their securities, which could cause the value of these securities to de-
cline. Issuers could experience three types of Year 2000 problems. First, if an
issuer's internal computer systems experience Year 2000 problems, this could
disrupt an issuer's operations (such as its ability to collect local taxes or
fees). Second, an issuer may rely on other parties for the payments that sup-
port its debt service, such as servicers that collect mortgage or student loan
payments, and those third parties may have Year 2000 problems that interfere
with their ability to forward payments to the issuer. Third, an issuer may have
mechanical problems in sending payments to its securities holders.
Nuveen Advisory is obtaining information about the Year 2000 readiness of the
issuers of its portfolio securities as part of its ongoing surveillance of the
creditworthiness of those issuers.
S-4
<PAGE>
Portfolio Securities
The various securities in which the Fund intends to invest are described in the
Prospectus. The following is a more complete description of certain securities
in which the Fund may invest:
Municipal Obligations.
The Fund invests in debt obligations issued by states, cities and local author-
ities to obtain funds for various public purposes, such as airports, highways,
housing, hospitals, mass transportation, water and sewer works, and include in-
dustrial development bonds and pollution control bonds. The two principal clas-
sifications of these securities (sometimes called Municipal Obligations) are
"general obligation" and "revenue" bonds. General obligation bonds are secured
by the issuer's pledge of its full faith, credit and taxing power for the pay-
ment of principal and interest. Revenue bonds are payable only from the reve-
nues derived from a particular facility or class of facilities or, in some
cases, from the proceeds of a special excise or other specific revenue source.
Industrial development and pollution control bonds are in most cases revenue
bonds and do not generally constitute the pledge of the credit or taxing power
of the issuer of such bonds.
Notes are short-term instruments with a maturity of two years or less. Most
notes are general obligations of the issuer and are sold in anticipation of a
bond sale, collection of taxes or receipt of other revenues. Payment of these
notes is primarily dependent upon the issuer's receipt of the anticipated reve-
nues. Other notes, include construction loan notes issued to provide construc-
tion financing for specific projects and bank notes issued by local governmen-
tal bodies and agencies to commercial banks as evidence of borrowings.
Municipal Obligations also include very short-term unsecured, negotiable prom-
issory notes, issued by states, municipalities, and their agencies which are
known as "tax-exempt commercial paper" or "municipal commercial paper." Payment
of principal and interest on issues or municipal commercial paper may be made
from various sources, to the extent the funds are available therefrom. There is
a limited secondary market for issues of municipal commercial paper.
While these various types of notes as a group represent the major portion of
the tax-exempt note market, other types of notes are occasionally available in
the marketplace and the Fund may invest in such other types of notes to the ex-
tent permitted under its investment policies and limitations. Such notes may be
issued for different purposes and with different security than those mentioned
above.
The yields on Municipal Obligations are dependent on a variety of factors, in-
cluding the condition of the general money market and the Municipal Obligation
market, the size of a particular offering, the maturity of the obligation and
the rating of the issue. The ratings of Moody's and S&P represent their opin-
ions as to the quality of the Municipal Obligations which they undertake to
rate. It should be emphasized, however, that ratings are general and are not
absolute standards of quality. Consequently, Municipal Obligations with the
same maturity, coupon and rating may have different yields while obligations of
the same maturity and coupon with different ratings may have the same yield.
The market value of outstanding Municipal Obligations will vary with changes in
prevailing interest rate levels and as a result of changing evaluations of the
ability of their issuers to meet interest and principal payments.
S-5
<PAGE>
California Municipal Obligations are issued by the State of California and cit-
ies and local authorities in the State of California, and bear interest that,
in the opinion of bond counsel to the issuer, is exempt from federal and Cali-
fornia income taxes, although such interest may be subject to the Federal al-
ternative minimum tax. The Fund will invest primarily in California Municipal
Obligations that are issued by the State of California and cities and local au-
thorities in the State of California, except that the Fund may invest not more
than 10% of its net assets in Municipal Obligations issued by United States
possessions or territories, which also bear interest that is exempt from regu-
lar federal as well as California personal income taxes.
The Fund may not invest more than 10% of its net assets in California Municipal
Obligations issued within certain U.S. possessions or territories.
Bond Anticipation Notes (BANs) are usually general obligations of state and lo-
cal governmental issuers which are sold to obtain interim financing for pro-
jects that will eventually be funded through the sale of long-term debt obliga-
tions or bonds. The ability of an issuer to meet its obligations on its BANs is
primarily dependent on the issuer's access to the long-term municipal bond mar-
ket and the likelihood that the proceeds of such bond sales will be used to pay
the principal and interest on the BANs.
Tax Anticipation Notes (TANs) are issued by state and local governments to fi-
nance the current operations of such governments. Repayment is generally to be
derived from specific future tax revenues. TANs are usually general obligations
of the issuer. A weakness in an issuer's capacity to raise taxes due to, among
other things, a decline in its tax base or a rise in delinquencies, could ad-
versely affect the issuer's ability to meet its obligations on outstanding
TANs.
Revenue Anticipation Notes (RANs) are issued by governments or governmental
bodies with the expectation that future revenues from a designated source will
be used to repay the notes. In general, they also constitute general obliga-
tions of the issuer. A decline in the receipt of projected revenues, such as
anticipated revenues from another level of government, could adversely affect
an issuer's ability to meet its obligations on outstanding RANs. In addition,
the possibility that the revenues would, when received, be used to meet other
obligations could affect the ability of the issuer to pay the principal and in-
terest on RANs.
Construction Loan Notes are issued to provide construction financing for spe-
cific projects. Frequently, these notes are redeemed with funds obtained from
the Federal Housing Administration.
Bank Notes are notes issued by local governmental bodies and agencies such as
those described above to commercial banks as evidence of borrowings. The pur-
poses for which the notes are issued are varied but they are frequently issued
to meet short-term working-capital or capital-project needs. These notes may
have risks similar to the risks associated with TANs and RANs.
Industrial Development Bonds (IDBs) and Pollution Control Bonds (PCBs) are is-
sued by or on behalf of public authorities to finance various privately-rated
facilities. Typically these bonds are included within the term Municipal Obli-
gation if the interest paid thereon is exempt from federal income tax.
Tax-Exempt Commercial Paper (Municipal Paper) represents very short-term
unsecured, negotiable promissory notes, issued by states, municipalities and
their agencies. Payment of principal and interest on issues of municipal paper
may be made from various sources, to the extent the funds are available
S-6
<PAGE>
therefrom. Maturities of municipal paper generally will be shorter than the ma-
turities of TANs, BANs or RANs. There is a limited secondary market for issues
of municipal paper.
Variable and Floating Rate Instruments-certain money market instruments may
carry variable or floating rates of interest. Such instruments bear interest at
rates which are not fixed, but which vary with changes in specified market
rates or indices, such as a bank prime rate or a tax-exempt money market index.
Variable rate notes are adjusted to current interest rate levels at certain
specified times, such as every 30 days, as set forth in the instrument. A
floating rate note adjusts automatically whenever there is a change in its base
interest rate adjustor, e.g., a change in the prime lending rate on specified
interest rate indices. Typically such instruments carry demand features permit-
ting the Money Market Fund to redeem at par upon specified notice.
The Fund's right to obtain payment at par on a demand instrument upon demand
could be affected by events occurring between the date the Fund elects to re-
deem the instrument and the date redemption proceeds are due which affect the
ability of the issuer to pay the instrument at par value. The Adviser will mon-
itor on an ongoing basis the pricing, quality and liquidity of such instruments
and will similarly monitor the ability of an issuer of a demand instrument, in-
cluding those supported by bank letters of credit or guarantees, to pay princi-
pal and interest on demand. Although the ultimate maturity of such variable
rate obligations may exceed 397 days, the Fund will treat the maturity of each
variable rate demand obligation, for purposes of computing its dollar weighted
average fund maturity, as the longer of (i) the notice period required before
the Fund is entitled to payment of the principal amount through demand, or (ii)
the period remaining until the next interest rate adjustment.
One form of variable or floating rate instrument consists of an underlying
fixed rate municipal bond that is subject to a third party demand feature or
"tender option." The holder of the bond would pay a "tender fee" to the third
party tender option provider, the amount of which would be periodically ad-
justed so that the bond/tender option combination would reasonably be expected
to have a market value that approximates the par value of the bond. This
bond/tender option combination would therefore be functionally equivalent to
ordinary variable or floating rate obligations as described above, and the Fund
may purchase such obligations subject to certain conditions specified by the
Securities and Exchange Commission.
The Fund may also obtain standby commitments with respect to Municipal Obliga-
tions. Under a standby commitment (often referred to as a put), the party issu-
ing the commitment agrees to purchase at the Fund's option the Municipal Obli-
gation at an agreed-upon price on certain dates or within a specific period.
Since the value of a standby commitment depends in part upon the ability of the
issuing party to meet its purchase obligations thereunder, the Fund will enter
into standby commitments only with parties which have been evaluated by Nuveen
Advisory and, in the opinion of Nuveen Advisory, present minimal credit risks.
The amount payable to the Fund upon its exercise of a standby commitment would
be (1) the acquisition cost of the Municipal Obligations (excluding any accrued
interest that the Fund paid on acquisition), less any amortized market premium
or plus any amortized market or original issue discount during the period the
Fund owned the security, plus (2) all interest accrued on the security since
the last
S-7
<PAGE>
interest payment date during the period the security was owned by the Fund. The
Fund's right to exercise standby commitments held by it will be unconditional
and unqualified. The acquisition of a standby commitment will not affect the
valuation of the underlying security, which will continue to be valued in ac-
cordance with the amortized cost method. The standby commitment itself will be
valued at zero in determining net asset value. The Fund may purchase standby
commitments for cash or pay a higher price for fund securities which are ac-
quired subject to such a commitment (thus reducing the yield to maturity other-
wise available for the same securities). The maturity of a Municipal Obligation
purchased by the Fund will not be considered shortened by any standby commit-
ment to which such security is subject. Although the Fund's rights under a
standby commitment would not be transferable, the Fund could sell Municipal Ob-
ligations which were subject to a standby commitment to a third party at any
time.
When-Issued Securities
The Fund may purchase and sell securities on a when-issued or delayed delivery
basis. When-issued and delayed delivery transactions arise when securities are
purchased or sold with payment and delivery beyond the regular settlement date
(when-issued transactions normally settle within 15-45 days). On such transac-
tions the payment obligation and the interest rate are fixed at the time the
buyer enters into the commitment. The commitment to purchase securities on a
when-issued or delayed delivery basis may involve an element of risk because
the value of the securities is subject to market fluctuation, no interest ac-
crues to the purchaser prior to settlement of the transaction, and at the time
of delivery the market value may be less than cost. At the time the Fund makes
the commitment to purchase a Municipal Obligation on a when-issued or delayed
delivery basis, it will record the transaction and reflect the amount due and
the value of the security in determining its net asset value. Likewise, at the
time the Fund makes the commitment to sell a Municipal Obligation on a delayed
delivery basis, it will record the transaction and include the proceeds to be
received in determining its net asset value; accordingly, any fluctuations in
the value of the Municipal Obligation sold pursuant to a delayed delivery com-
mitment are ignored in calculating net asset value so long as the commitment
remains in effect. The Fund will also maintain designated readily marketable
assets at least equal in value to commitments to purchase when-issued or de-
layed delivery securities, such assets to be segregated by the Custodian spe-
cifically for the settlement of such commitments. The Fund will only make com-
mitments to purchase Municipal Obligations on a when-issued or delayed delivery
basis with the intention of actually acquiring the securities, but the Fund re-
serves the right to sell these securities before the settlement date if it is
deemed advisable. If a when-issued security is sold before delivery any gain or
loss would not be tax-exempt. The Fund commonly engages in when-issued transac-
tions in order to purchase or sell newly-issued Municipal Obligations, and may
engage in delayed delivery transactions in order to manage its operations more
effectively.
Special Considerations Relating to California Securities
Because the Fund invests substantially all of its assets in California Securi-
ties, the Fund is therefore susceptible to political, economic or regulatory
factors affecting California issuers. These include the possible adverse ef-
fects of certain California constitutional amendments, legislative measures,
voter initiatives and other matters that are described below. The following in-
formation provides only a brief summary of the complex factors affecting the
financial situation in California (the "State") and is derived
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from sources that are generally available to investors and is believed to be
accurate. No independent verification has been made of the accuracy or com-
pleteness of any of the following information. It is based in part on informa-
tion obtained from various State and local agencies in California or contained
in Official Statements for various California issues.
During the early 1990's, California experienced significant financial difficul-
ties, which reduced its credit standing, but the state's finances have improved
since 1994. The ratings of certain related debt of other issuers for which Cal-
ifornia has an outstanding lease purchase, guarantee or other contractual obli-
gation (such as for state-insured hospital bonds) are generally linked directly
to California's rating. Should the financial condition of California deterio-
rate again, its credit ratings could be further reduced, and the market value
and marketability of all outstanding notes and bonds issued by California, its
public authorities or local governments could be adversely affected.
Economic Overview
Total personal income in the State, at an estimated $800 billion in 1996, ac-
counts for almost 13% of all personal income in the nation. Total employment is
over 15.6 million, the majority of which is in the service, trade and manufac-
turing sectors.
Unemployment has declined dramatically from its 10% recession peak and is rap-
idly approaching the national level. Economic indicators show a steady and
strong recovery underway in California since the start of 1994, particularly in
the export-related industries, services, electronics, entertainment and tour-
ism. The recovery in export-related industries has been dampened somewhat by
the economic crisis in Asia.
Constitutional Limitations on Taxes, Other Charges and Appropriations
Limitation on Property Taxes. Certain California Municipal Obligations may be
obligations of issuers which rely in whole or in part, directly or indirectly,
on ad valorem property taxes as a source of revenue. The taxing powers of Cali-
fornia local governments and districts are limited by Article XIIIA of the
California Constitution, enacted by the voters in 1978 and commonly known as
"Proposition 13." Briefly, Article XIIIA limits to 1% of full cash value the
rate of ad valorem property taxes on real property and generally restricts the
reassessment of property to 2% per year, except upon new construction or change
of ownership (subject to a number of exemptions). Taxing entities may, however,
raise ad valorem taxes above the 1% limit to pay debt service on voter-approved
bonded indebtedness.
Under Article XIIIA, the basic 1% ad valorem tax levy is applied against the
assessed value of property as of the owner's date of acquisition (or as of
March 1, 1975, if acquired earlier), subject to certain adjustments. This sys-
tem has resulted in widely varying amounts of tax on similarly situated proper-
ties. Several lawsuits have been filed challenging the acquisition-based as-
sessment system of Proposition 13, but it was upheld by the U.S. Supreme Court
in 1992.
Article XIIIA prohibits local governments from raising revenues through ad va-
lorem property taxes above the 1% limit; it also requires voters of any govern-
mental unit to give two-thirds approval to levy any "special tax." Court deci-
sions, however, allowed a non-voter approved levy of "general taxes" which were
not dedicated to a specific use.
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Limitation on Other Taxes, Fees and Charges. On November 5, 1996, the voters
of the State approved Proposition 218, called the "Right to Vote on Taxes
Act." Proposition 218 added Articles XIIIC and XIIID to the State Constitu-
tion, which contain a number of provisions affecting the ability of local
agencies to levy and collect both existing and future taxes, assessments, fees
and charges.
Article XIIIC requires that all new or increased local taxes be submitted to
the electorate before they become effective. Taxes for general governmental
purposes require a majority vote and taxes for specific purposes require a
two-thirds vote. Further, any general purpose tax which was imposed, extended
or increased without voter approval after December 31, 1994 must be approved
by a majority vote within two years.
Article XIIID contains several new provisions making it generally more diffi-
cult for local agencies to levy and maintain "assessments" for municipal serv-
ices and programs. Article XIIID also contains several new provisions affect-
ing "fees" and "charges", defined for purposes of Article XIIID to mean "any
levy other than an ad valorem tax, a special tax, or an assessment, imposed by
a [local government] upon a parcel or upon a person as an incident of property
ownership, including a user fee or charge for a property related service." All
new and existing property related fees and charges must conform to require-
ments prohibiting, among other things, fees and charges which generate reve-
nues exceeding the funds required to provide the property related service or
are used for unrelated purposes. There are new notice, hearing and protest
procedures for levying or increasing property related fees and charges, and,
except for fees or charges for sewer, water and refuse collection services (or
fees for electrical and gas service, which are not treated as "property relat-
ed" for purposes of Article XIIID), no property related fee or charge may be
imposed or increased without majority approval by the property owners subject
to the fee or charge or, at the option of the local agency, two-thirds voter
approval by the electorate residing in the affected area.
In addition to the provisions described above, Article XIIIC removes limita-
tions on the initiative power in matters of local taxes, assessments, fees and
charges. Consequently, local voters could, by future initiative, repeal, re-
duce or prohibit the future imposition or increase of any local tax, assess-
ment, fee or charge. It is unclear how this right of local initiative may be
used in cases where taxes or charges have been or will be specifically pledged
to secure debt issues.
The interpretation and application of Proposition 218 will ultimately be de-
termined by the courts with respect to a number of matters, and it is not pos-
sible at this time to predict with certainty the outcome of such determina-
tions. Proposition 218 is generally viewed as restricting the fiscal flexibil-
ity of local governments, and for this reason, some ratings of California cit-
ies and counties have been, and others may be, reduced.
Appropriations Limits. The State and its local governments are subject to an
annual "appropriations limit" imposed by Article XIIIB of the California Con-
stitution, enacted by the voters in 1979 and significantly amended by Proposi-
tions 98 and 111 in 1988 and 1990, respectively. Article XIIIB prohibits the
State or any covered local government from spending "appropriations subject to
limitation" in excess of the appropriations limit imposed. "Appropriations
subject to limitation" are authorizations to spend "proceeds of taxes," which
consist of tax revenues and certain other funds, including proceeds
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from regulatory licenses, user charges or other fees, to the extent that such
proceeds exceed the cost of providing the product or service, but "proceeds of
taxes" exclude most State subventions to local governments. No limit is im-
posed on appropriations of funds which are not "proceeds of taxes," such as
reasonable user charges or fees, and certain other non-tax funds, including
bond proceeds.
Among the expenditures not included in the Article XIIIB appropriations limit
are (1) the debt service cost of bonds issued or authorized prior to January
1, 1979, or subsequently authorized by the voters, (2) appropriations arising
from certain emergencies declared by the Governor, (3) appropriations for cer-
tain capital outlay projects, (4) appropriations by the State of post-1989 in-
creases in gasoline taxes and vehicle weight fees, and (5) appropriations made
in certain cases of emergency.
The appropriations limit for each year is adjusted annually to reflect changes
in cost of living and population, and any transfers of service responsibili-
ties between government units. The definitions for such adjustments were lib-
eralized in 1990 to follow more closely growth in the State's economy.
"Excess" revenues are measured over a two year cycle. Local governments must
return any excess to taxpayers by rate reductions. The State must refund 50%
of any excess, with the other 50% paid to schools and community colleges. With
more liberal annual adjustment factors since 1988, and depressed revenues
since 1990 because of the recession, few governments are currently operating
near their spending limits, but this condition may change over time. Local
governments may by voter approval exceed their spending limits for up to four
years. During fiscal year 1986-87, State receipts from proceeds of taxes ex-
ceeded its appropriations limit by $1.1 billion, which was returned to taxpay-
ers. Since that year, appropriations subject to limitation have been under the
State limit. State appropriations were $7.0 billion under the limit for fiscal
year 1996-97.
Because of the complex nature of Articles XIIIA, XIIIB, XIIIC and XIIID of the
California Constitution, the ambiguities and possible inconsistencies in their
terms, and the impossibility of predicting future appropriations or changes in
population and cost of living, and the probability of continuing legal chal-
lenges, it is not currently possible to determine fully the impact of these
Articles on California Municipal Obligations or on the ability of the State or
local governments to pay debt service on such California Municipal Obliga-
tions. It is not possible, at the present time, to predict the outcome of any
pending litigation with respect to the ultimate scope, impact or constitution-
ality of these Articles, or the impact of any such determinations upon State
agencies or local governments, or upon their ability to pay debt service on
their obligations. Future initiatives or legislative changes in laws or the
California Constitution may also affect the ability of the State or local is-
suers to repay their obligations.
Obligations of the State of California
Under the California Constitution, debt service on outstanding general obliga-
tion bonds is the second charge to the General Fund after support of the pub-
lic school system and public institutions of higher education. Under the Cali-
fornia Constitution, debt service on outstanding general obligation bonds is
the second charge to the General Fund after support of the public school sys-
tem and public institutions of higher education. As of June 30, 1997, the
State had outstanding approximately $17.95 billion of long-term general obli-
gation bonds, plus $781 million of general obligation commercial paper which
will be refunded by long-term bonds in the future, and $6.1 billion of lease-
purchase debt supported by
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the State General Fund. The State also had about $7.5 billion of authorized
and unissued general obligation bonds. In FY 1996-97, debt service on general
obligation bonds and lease purchase bonds was approximately 5.0% of General
Fund revenues.
Recent Financial Results
The principal sources of General Fund revenues in 1996-97 were the California
personal income tax (27% of total revenues), the sales and use tax (24%) and
bank and corporation taxes (7%). The State maintains a Special Fund for Eco-
nomic Uncertainties (the "SFEU"), derived from General Fund revenues, as a re-
serve to meet cash needs of the General Fund, but which is required to be re-
plenished as soon as sufficient revenues are available. During the 1997 fiscal
year the SFEU was fully depleted. However, the robust economy should afford
the State the ability to appropriate funds to the SFEU in the near term.
General. Throughout the 1980's, State spending increased rapidly as the State
population and economy also grew rapidly, including increased spending for
many assistance programs to local governments, which were constrained by Prop-
osition 13 and other laws. The largest State program is assistance to local
public school districts. In 1988, an initiative (Proposition 98) was enacted
which (subject to suspension by a two-thirds vote of the Legislature and the
Governor) guarantees local school districts and community college districts a
minimum share of State General Fund revenues (currently about 35%).
Since the start of the 1990-91 fiscal year, the State has faced adverse eco-
nomic, fiscal, and budget conditions. The economic recession seriously af-
fected State tax revenues. It also caused increased expenditures for health
and welfare programs. Since the start of the 1990-91 fiscal year, the State
has faced adverse economic, fiscal and budget conditions. The economic reces-
sion seriously affected State tax revenues. It also caused increased expendi-
tures for health and welfare programs. As a result of the strengthening State
economy, General Fund revenue growth is now outpacing the costs associated
with many of the larger programs supported by the General Fund. However, the
State will face additional challenges in coming years by the expected need to
substantially increase capital and operating funds for State infrastructure
needs, as well as corrections resulting from a "Three Strikes" law enacted in
1994.
Recent Budgets. As a result of these factors, among others, from the late
1980's until 1992-93, the State had a period of nearly chronic budget imbal-
ance, with expenditures exceeding revenues in four out of six years, and the
State accumulated and sustained a budget deficit in the budget reserve, the
SFEU approaching $2.8 billion at its peak at June 30, 1993. Starting in the
1990-91 Fiscal Year and for each year thereafter, each budget required
multibillion dollar actions to bring projected revenues and expenditures into
balance and to close large "budget gaps" which were identified. The Legisla-
tive and Governor eventually agreed on a number of different steps to produce
Budget Acts in the Years 1991-92 to 1995-96 (although not all of these actions
were taken in each year):
. significant cuts in health and welfare program expenditures;
. transfers of program responsibilities and some funding sources from the
State to local governments, coupled with some reduction in mandates on lo-
cal government;
. transfer of about $3.6 billion in annual local property tax revenues from
cities, counties, redevelopment agencies and some other districts to local
school districts, thereby reducing state funding for schools;
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. reduction in growth of support for higher education programs, coupled with
increases in student fees;
. revenue increases (particularly in the 1992-92 Fiscal Year budget), most of
which were for a short duration;
. increased reliance on aid from the federal government to offset the costs
of incarcerating, educating and providing health and welfare services to
undocumented aliens (although these efforts have produced much less federal
aid than the State Administration had requested); and
. various one-time adjustment and accounting changes.
Despite these budget actions, the effects of the recession led to large unan-
ticipated deficits in the SFEU, as compared to projected positive balances. By
the start of the 1993-94 Fiscal Year, the accumulated deficit was so large (al-
most $2.8 billion) that it was impractical to budget to retire it in one year,
so a two-year program was implemented, using the issuance of revenue anticipa-
tion warrants to carry a portion of the deficit over the end of the fiscal
year. When the economy failed to recover sufficiently in 1993-94, a second two-
year plan was implemented in 1994-95, to carry the final retirement of the def-
icit into 1995-96.
The combination of stringent budget actions cutting State expenditures, and the
turnaround of the economy by late 1993, finally led to the restoration of posi-
tive financial results. While General Fund revenues and expenditures were es-
sentially equal in FY 1992-93 (following two years of excess expenditures over
revenues), the General Fund had positive operating results in FY 1993-94, 1994-
95, and 1995-96 which have reduced the accumulated budget deficit to about $70
million as of June 30, 1996.
A consequence of the accumulated budget deficits in the early 1990's, together
with other factors such as disbursement of funds to local school districts
"borrowed" from future fiscal years and hence not shown in the annual budget,
was to significantly reduce the State's cash resources available to pay its on-
going obligations. When the Legislature and the Governor failed to adopt a bud-
get for the 1992-93 Fiscal Year by July 1, 1992, which would have allowed the
State to carry out its normal annual cash flow borrowing to replenish its cash
reserves, the State Controller was forced to issue approximately $3.8 billion
of registered warrants ("IOUs") over a 2-month period to pay a variety of obli-
gations representing prior years' or continuing appropriations, and mandates
from court orders.
The State's cash condition became so serious that from late spring 1992 until
1995, the State had to rely on issuance of short term notes which matured in a
subsequent fiscal year to finance its ongoing deficit, and pay current obliga-
tions. With the repayment of the last of these deficit notes in April, 1996,
the State does not plan to rely further on external borrowing across fiscal
years, but will continue its normal cash flow borrowings during a fiscal year.
The 1997-98 Budget Act was signed by the Governor on August 18, 1997, together
with related implementating bills. The total budget package authorized State
expenditures of $67.2 billion. This total spending includes $52.8 billion from
the General Fund (an 8 percent increase from 1996-97) and $14.4 billion from
special funds (a 6.1 percent increase). The 1997-98 Budget Act included signif-
icant increases in education spending and a major reform to the State's welfare
program. In other areas, the
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budget includes relatively few new initiatives and fairly limited changes to
program funding. This was due to the decision to repay the Public Employee's
Retirement System (PERS) $1.2 billion. The repayment resulted from a court rul-
ing which declared unconstitutional the General Fund's deferral of State con-
tributions to the retirement fund in the early 1990s.
The following are principal features of the 1997-98 Budget Act:
1. No tax cuts were included in the final budget. The Legislature rejected the
Governor's proposal for a reduction in personal and corporate income tax
rates.
2. Major increases in K-12 education. The budget would use the increased fund-
ing to expand the class size reduction program to a fourth grade and signif-
icantly increase local revenue limit funding.
3. The University of California, California State University and California
Community Colleges would receive additional funding with no fee increases.
4. A major welfare reform program CalWORKs (California Work Opportunity and Re-
sponsibility to Kids Program) was funded. It includes time limits on aid for
adults, participation requirements for adults, expanded child care and job
training service, and various county fiscal incentives.
5. The budget funded inmate caseload and contains no money for new prisons. In
addition, the budget assumed $94 million more in federal funds than the
amount in the Governor's budget to offset the State's cost of supervising
undocumented felons.
The Department of Finance has reported that, based on stronger than expected
revenues during the first nine months of the 1997-98 fiscal year, reflecting
the continued strength of the State's economic recovery, General Fund revenues
are $301 million above projections.
Proposed 1999-2000 Budget. On January 9, 1999, the Governor released his pro-
posed budget for FY 1999-2000. Assuming continuing strength in the economy, the
Governor projects General Fund revenues (including transfers) to be [$55.4]
billion and proposes expenditures to be [$55.4] billion, to leave a budget re-
serve in the SFEU of [$296] million at June 30, 2000. The Governor proposed
further programs emphasizing education, public safety, and economic develop-
ment.
Although the State's strong economy is producing record revenues to the State
government, the State's budget continues to be under stress from mandated
spending on education, a rising prison population, and social needs of a grow-
ing population with many immigrants. These factors which limit State spending
growth also put pressure on local governments. There can be no assurances that,
if economic conditions weaken, or other factors intercede, the State will not
experience budget gaps in the future.
Bond Rating
The ratings on California's long-term general obligation bonds were reduced in
the early 1990s from "AAA" levels which had existed prior to the recession. In
1997, Fitch raised their rating of California's general obligation bonds, which
as of May 1998, were assigned ratings of "A+" by Standard & Poor's, "A1" by
Moody's and "AA-" from Fitch.
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There can be no assurance that such ratings will be maintained in the future.
It should be noted that the creditworthiness of obligations issued by local
California issuers may be unrelated to the creditworthiness of obligations is-
sued by the State of California, and that there is no obligation on the part of
the State to make payment on such local obligations in the event of default.
Legal Proceedings
The State is involved in certain legal proceedings (described in the State's
recent financial statements) that, if decided against the State, may require
the State to make significant future expenditures or may substantially impair
revenues. Trial courts have recently entered tentative decisions or injunctions
which would overturn several parts of the state's recent budget compromises.
The matters covered by these lawsuits include reductions in welfare payments
and the use of certain cigarette tax funds for health costs. All of these cases
are subject to further proceedings and appeals, and if California eventually
loses, the final remedies may not have to be implemented in one year.
Obligations of Other Issuers
Other Issuers of California Municipal Obligations
There are a number of state agencies, instrumentalities and political subdivi-
sions of the State that issue Municipal Obligations, some of which may be con-
duit revenue obligations payable from payments from private borrowers. These
entities are subject to various economic risks and uncertainties, and the
credit quality of the securities issued by them may vary considerably from the
credit quality of obligations backed by the full faith and credit of the State.
State Assistance. Property tax revenues received by local governments declined
more than 50% following passage of Proposition 13. Subsequently, the California
Legislature enacted measures to provide for the redistribution of the State's
General Fund surplus to local agencies, the reallocation of certain State reve-
nues to local agencies and the assumption of certain governmental functions by
the State to assist municipal issuers to raise revenues. Total local assistance
from the State's General Fund was budgeted at approximately 75% of General Fund
expenditures in recent years, including the effect of implementing reductions
in certain aid programs. To reduce State General Fund support for school dis-
tricts, the 1992-93 and 1993-94 Budget Acts caused local governments to trans-
fer $3.9 billion of property tax revenues to school districts, representing
loss of the post-Proposition 13 "bailout" aid. Local governments have in return
received greater revenues and greater flexibility to operate health and welfare
programs. To the extent the State should be constrained by its Article XIIIB
appropriations limit, or its obligation to conform to Proposition 98, or other
fiscal considerations, the absolute level, or the rate of growth, of State as-
sistance to local governments may continue to be reduced. Any such reductions
in State aid could compound the serious fiscal constraints already experienced
by many local governments, particularly counties. At least one rural county
(Butte) publicly announced that it might enter bankruptcy proceedings in August
1990, although such plans were put off after the Governor approved legislation
to provide additional funds for the county. Other counties have also indicated
that their budgetary condition is extremely grave. Los Angeles County, the
largest in the State, was forced to make significant cuts in services and per-
sonnel, particularly in the health care system, in order to balance its budget
in 1995-96 and 1996-97. Los Angeles County's debt was downgraded by Moody's and
S&P in the summer of 1995. Orange County, which emerged from Federal Bankruptcy
Court protection in June 1996, has significantly reduced county services and
personnel, and faces strict financial conditions following large investment
fund losses in 1994 which resulted in bankruptcy.
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Counties and cities may face further budgetary pressures as a result of changes
in welfare and public assistance programs, which were to be enacted by June,
1997 in order to comply with federal welfare reform law. It is not yet known
what the overall impact will be on local government finances.
Assessment Bonds. California Municipal Obligations which are assessment bonds
may be adversely affected by a general decline in real estate values or a slow-
down in real estate sales activity. In many cases, such bonds are secured by
land which is undeveloped at the time of issuance but anticipated to be devel-
oped within a few years after issuance. In the event of such reduction or slow-
down, such development may not occur or may be delayed, thereby increasing the
risk of a default on the bonds. Because the special assessments or taxes secur-
ing these bonds are not the personal liability of the owners of the property
assessed, the lien on the property is the only security for the bonds. More-
over, in most cases the issuer of these bonds is not required to make payments
on the bonds in the event of delinquency in the payment of assessments or tax-
es, except from amounts, if any, in a reserve fund established for the bonds.
California Long Term Lease Obligations. Based on a series of court decisions,
certain long-term lease obligations, though typically payable from the general
fund of the State or a municipality, are not considered "indebtedness" requir-
ing voter approval. Such leases, however, are subject to "abatement" in the
event the facility being leased is unavailable for beneficial use and occupancy
by the municipality during the term of the lease. Abatement is not a default,
and there may be no remedies available to the holders of the certificates evi-
dencing the lease obligation in the event abatement occurs. The most common
cases of abatement are failure to complete construction of the facility before
the end of the period during which lease payments have been capitalized and un-
insured casualty losses to the facility (e.g., due to earthquake). In the event
abatement occurs with respect to a lease obligation, lease payments may be in-
terrupted (if all available insurance proceeds and reserves are exhausted) and
the certificates may not be paid when due. Litigation is brought from time to
time which challenges the constitutionality of such lease arrangements.
Other Considerations
The repayment of industrial development securities secured by real property may
be affected by California laws limiting foreclosure rights of creditors. Secu-
rities backed by healthcare and hospital revenues may be affected by changes in
State regulations governing cost reimbursements to health care providers under
Medi-Cal (the State's Medicaid program), including risks related to the policy
of awarding exclusive contracts to certain hospitals.
Limitations on ad valorem property taxes may particularly affect "tax alloca-
tion" bonds issued by California redevelopment agencies. Such bonds are secured
solely by the increase in assessed valuation of a redevelopment project area
after the start of redevelopment activity. In the event that assessed values in
the redevelopment project decline (e.g., because of a major natural disaster
such as an earthquake), the tax increment revenue may be insufficient to make
principal and interest payments on these bonds. Both Moody's and S&P suspended
ratings on California tax allocation bonds after the enactment of Articles
XIIIA and XIIIB, and only resumed such ratings on a selective basis.
Proposition 87, approved by California voters in 1988, requires that all reve-
nues produced by a tax rate increase go directly to the taxing entity which in-
creased such tax rate to repay that entity's general
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obligation indebtedness. As a result, redevelopment agencies (which, typically,
are the issuers of tax allocation securities) no longer receive an increase in
tax increment when taxes on property in the project area are increased to repay
voter-approved bonded indebtedness.
The effect of these various constitutional and statutory changes upon the abil-
ity of California municipal securities issuers to pay interest and principal on
their obligations remains unclear. Furthermore, other measures affecting the
taxing or spending authority of California or its political subdivisions may be
approved or enacted in the future. Legislation has been or may be introduced
which would modify existing taxes or other revenue-raising measures or which
either would further limit or, alternatively, would increase the abilities of
state and local governments to impose new taxes or increase existing taxes. It
is not possible, at present, to predict the extent to which any such legisla-
tion will be enacted. Nor is it possible, at present, to determine the impact
of any such legislation on California Municipal Obligations in which the Fund
may invest, future allocations of state revenues to local governments or the
abilities of state or local governments to pay the interest on, or repay the
principal of, such California Municipal Obligations.
Substantially all of California is within an active geologic region subject to
major seismic activity. Northern California in 1989 and Southern California in
1994 experienced major earthquakes causing billions of dollars in damages. The
federal government provided more than $13 billion in aid for both earthquakes,
and neither event is expected to have any long-term negative economic impact.
Any California Municipal Obligation in the Fund could be affected by an inter-
ruption of revenues because of damaged facilities, or, consequently, income tax
deductions for casualty losses or property tax assessment reductions. Compensa-
tory financial assistance could be constrained by the inability of (i) an is-
suer to have obtained earthquake insurance coverage at reasonable rates; (ii)
an insurer to perform on its contracts of insurance in the event of widespread
losses; or (iii) the federal or State government to appropriate sufficient
funds within their respective budget limitations.
Taxable Investments
Taxable investments (sometimes called "Temporary Investments") include obliga-
tions of the United States Government, its agencies or instrumentalities; debt
securities of issuers having, at the time of purchase, a quality rating within
the two highest grades by either Moody's Investors Service, Inc. ("Moody's") or
Standard and Poor's Corporation ("S&P") (Aaa or Aa, or AAA or AA, respective-
ly); commercial paper rated in the highest grade by either of such rating serv-
ices (Prime-1 or A-1, respectively); certificates of deposit of domestic banks
with assets of $1 billion or more; and municipal securities and U.S. Government
obligations subject to short-term repurchase agreements.
Subject to the limitation described in the Prospectus, the Funds may invest in
the following taxable investments:
U.S. Government Direct Obligations--issued by the United States Treasury and
include bills, notes and bonds.
- -- Treasury bills are issued with maturities of up to one year. They are issued
in bearer form, are sold on a discount basis and are payable at par value at
maturity.
- -- Treasury notes are longer-term interest-bearing obligations with original
maturities of one to seven years.
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- -- Treasury bonds are longer-term interest-bearing obligations with original
maturities from five to thirty years.
U.S. Government Agencies Securities--Certain federal agencies have been estab-
lished as instrumentalities of the United States Government to supervise and
finance certain types of activities. These agencies include, but are not lim-
ited to, the Bank for Cooperatives, Federal Land Bank, Federal Intermediate
Credit Banks, Federal Home Loan Banks, Federal National Mortgage Association,
Government National Mortgage Association, Export-Import Bank of the United
States and Tennessee Valley Authority. Issues of these agencies, while not di-
rect obligations of the United States Government, are either backed by the
full faith and credit of the United States or are guaranteed by the Treasury
or supported by the issuing agencies' right to borrow from the Treasury. There
can be no assurance that the United States Government itself will pay interest
and principal on securities as to which it is not so legally obligated.
Certificates of Deposits (CDs)--A certificate of deposit is a negotiable in-
terest-bearing instrument with a specific maturity. CDs are issued by banks in
exchange for the deposit of funds and normally can be traded in the secondary
market, prior to maturity. The Funds will only invest in U.S. dollar denomi-
nated CDs issued by U.S. banks with assets of $1 billion or more.
Commercial Paper--Commercial paper is the term used to designate unsecured
short-term promissory notes issued by corporations. Maturities on these issues
vary from a few to 397 days. Commercial paper may be purchased from U.S. cor-
porations.
Other Corporate Obligations--The Funds may purchase notes, bonds and deben-
tures issued by corporations if at the time of purchase there is less than 397
days remaining until maturity or if they carry a variable or floating rate of
interest.
Repurchase Agreements--A repurchase agreement is a contractual agreement
whereby the seller of securities agrees to repurchase the same security at a
specified price on a future date agreed upon by the parties. The agreed upon
repurchase price determines the yield during the Fund's holding period. Repur-
chase agreements are considered to be loans collateralized by the underlying
security that is the subject of the repurchase contract. The Funds will only
enter into repurchase agreements with dealers, domestic banks or recognized
financial institutions that in the opinion of Nuveen Advisory present minimal
credit risk. The risk to the Funds is limited to the ability of the Issuer to
pay the agreed-upon repurchase price on the delivery date; however, although
the value of the underlying collateral at the time the transaction is entered
into always equals or exceeds the agreed-upon repurchase price, if the value
of the collateral declines there is a risk of loss of both principal and in-
terest. In the event of default, the collateral may be sold but the Funds
might incur a loss if the value of the collateral declines, and might incur
disposition costs or experience delays in connection with liquidating the col-
lateral. In addition, if bankruptcy proceedings are commenced with respect to
the seller of the security, realization upon the collateral by the Funds may
be delayed or limited. Nuveen Advisory will monitor the value of the collat-
eral at the time the transaction is entered into and at all times subsequent
during the term of the repurchase agreement in an effort to determine that the
value always equals or exceeds the agreed-upon repurchase price. In the event
the value of the collateral declines below the repurchase price, Nuveen Advi-
sory will demand additional collateral from the issuer to increase the value
of the collateral to at least that of the repurchase price.
S-18
<PAGE>
Ratings of Investments
The two highest ratings of Moody's for municipal securities are Aaa and Aa. Mu-
nicipal securities rated Aaa are judged to be of the "best quality." The rating
of Aa is assigned to municipal securities which are of "high quality by all
standards," but as to which margins of protection or other elements make long-
term risks appear somewhat larger than in Aaa rated municipal securities. The
Aaa and Aa rated municipal securities comprise what are generally known as
"high grade bonds." Moddy's bond rating symbols may contain numerical modifiers
of a generic rating classification. The modifier 1 indicates that the bond
ranks at the high end of its category; the modifier 2 indicates a mid-range
ranking, and the modifier 3 indicates that the issue ranks in the lower end of
its generic rating category.
The two highest ratings of S&P for municipal securities are AAA and AA. Munici-
pal securities rated AAA have an extremely strong capacity to pay principal and
interest. The rating of AA indicates that capacity to pay principal and inter-
est is very strong and such bonds differ from AAA issues only in small degree.
The two highest ratings of Moody's and S&P for federally tax-exempt short-term
loans and notes are MIG-1 and MIG-2, or VMIG-1 and VMIG-2 in the case of vari-
able instruments, and SP-1 and SP-2, respectively. Obligations designated MIG-1
or VMIG-1 are the best quality enjoying strong protection from established cash
flows of funds for their servicing or from established and broad-based access
to the market for refinancing, or both. Obligations designated as MIG-2 or
VMIG-2 are high quality obligations with ample margins of protection. The des-
ignation SP-1 indicates a very strong or strong capacity to pay principal and
interest while the designation SP-2 denotes a satisfactory capacity to pay
principal and interest.
The Fund's ability to purchase commercial paper of tax-exempt and corporate is-
suers is limited to commercial paper rated highly by nationally recognized sta-
tistical rating organizations. Issuers rated in the highest category generally
have a superior capacity for repayment of short-term obligations normally evi-
denced by the following characteristics: leading market positions in well-es-
tablished industries; high rates of return of funds employed; conservative cap-
italization structures with moderate reliance on debt and ample asset protec-
tion; board margins in earnings coverage of fixed financial charges and high
internal cash generation; well-established access to a range of financial mar-
kets and assured sources of alternative liquidity. Issuers rated in the second
highest category have a strong capacity for repayment of short-term promissory
obligations.
Subsequent to its purchase by the Fund, an issue may cease to be rated or its
rating may be reduced below the minimum required for purchase by the Fund. Nei-
ther event requires the elimination of such obligations from the Fund, but
Nuveen Advisory will consider such an event in its determination of whether the
Fund should continue to hold such obligation.
S-19
<PAGE>
MANAGEMENT
The management of the Trust, including general supervision of the duties per-
formed by Nuveen Advisory under the Investment Management Agreement, is the re-
sponsibility of its Board of Trustees. There are seven trustees of the Trust,
one of whom is an "interested person" (as that term is defined in the Invest-
ment Company Act of 1940). None of the trustees who are not "interested per-
sons" of the Fund has ever been a director or employee of, or consultant to,
Nuveen or its affiliates. The names and business addresses of the trustees and
officers of the Trust and their ages and principal occupations and other affil-
iations during the past five years are set forth below.
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
Positions
and
Offices Principal Occupation
Name and Address Age with Fund During Past Five Years
- -------------------------------------------------------------------------------
<C> <C> <C> <S>
Timothy R. Schwertfeger*+ 49 Chairman Chairman of the Board of the
333 West Wacker Drive and Trustee Funds (since July 1996); Trustee
Chicago, IL 60606 and President of the Funds
advised by Nuveen Institutional
Advisory Corp. (since July 1996);
Chairman (since July 1996),
Director, and previously
Executive Vice President, of The
John Nuveen Company, John Nuveen
& Co., Nuveen Advisory Corp. and
Nuveen Institutional Advisory
Corp.; Director (since 1996) of
Institutional Capital
Corporation; Chairman and
Director of Nuveen Asset
Management, Inc.; Chairman and
Director of Rittenhouse Financial
Services Inc. (since 1999).
- -------------------------------------------------------------------------------
Robert P. Bremner 58 Trustee Private Investor and Management
3725 Huntington Street, N.W. Consultant.
Washington, D.C. 20015
- -------------------------------------------------------------------------------
Lawrence H. Brown 64 Trustee Retired (August 1989) as Senior
201 Michigan Avenue Vice President of The Northern
Highwood, IL 60040 Trust Company (banking and trust
industry).
- -------------------------------------------------------------------------------
Anne E. Impellizzeri 66 Trustee Executive Director (since 1998)
3 West 29th Street of Manitoga (center for Russell
New York, NY 10001 Wright's design/home and
landscape); formerly President
and Chief Executive Officer of
Blanton-Peale, Institutes of
Religion and Health (a training
and counseling organization).
- -------------------------------------------------------------------------------
Peter R. Sawers 66 Trustee Adjunct Professor of Business and
22 The Landmark Economics, University of Dubuque,
Northfield, IL 60093 Iowa; Adjunct Professor, Lake
Forest Graduate School of
Management, Lake Forest,
Illinois; Chartered Financial
Analyst; Certified Management
Consultant.
- -------------------------------------------------------------------------------
William J. Schneider 54 Trustee Senior Partner and Chief
4000 Miller-Valentine Ct. Operating Officer, Miller-
P.O. Box 744 Valentine Partners, Vice
Dayton, OH 45401 President, Miller-Valentine Group
(commercial real estate); Member
Community Advisory Board,
National City Bank, Dayton, Ohio.
</TABLE>
- --------------------------------------------------------------------------------
S-20
<PAGE>
<TABLE>
- ---------------------------------------------------------------------------------------
<CAPTION>
Principal Occupations
Name and Address Age Positions and Offices with Fund During Past Five Years
- ---------------------------------------------------------------------------------------
<C> <C> <C> <S>
Judith M. Stockdale 51 Trustee Executive Director,
35 E. Wacker Drive Gaylord and Dorothy
Suite 2600 Donnelley Foundation, a
Chicago, IL 60601 private family
foundation (since 1994);
prior thereto, Executive
Director, Great Lakes
Protection Fund (from
1990 to 1994).
- --------------------------------------------------------------------------------
Alan G. Berkshire+ 38 Vice President and Asst. Secretary Vice President and
333 West Wacker Drive since 1998 General Counsel (since
Chicago, IL 60606 September 1997) and
Secretary (since May
1998) of The John Nuveen
Company, John Nuveen &
Co. Incorporated, Nuveen
Advisory Corp. and
Nuveen Institutional
Advisory Corp.; prior
thereto, partner in the
law firm of Kirkland &
Ellis.
- --------------------------------------------------------------------------------
Peter H. D'Arrigo 31 Vice President and Treasurer Vice President of John
333 West Wacker Drive since 1999 Nuveen & Co.
Chicago, IL 60606 Incorporated (since
January 1999), prior
thereto. Assistant Vice
President (from January
1997); formerly,
Associate of John Nuveen
& Co. Incorporated;
Chartered Financial
Analyst.
- --------------------------------------------------------------------------------
Michael S. Davern+ 41 Vice President since 1997 Vice President of Nuveen
333 West Wacker Drive Advisory Corp. (since
Chicago, IL 60606 January 1997); prior
thereto, Vice President
and Portfolio Manager of
Flagship Financial, Inc.
(from September 1991 to
January 1997).
- ---------------------------------------------------------------------------------------
Lorna C. Ferguson+ 53 Vice President since 1998 Vice President of John
333 West Wacker Drive Nuveen & Co.
Chicago, IL 60606 Incorporated; Vice
President of Nuveen
Advisory Corp. and
Nuveen Institutional
Advisory Corp. (since
January 1998).
- ---------------------------------------------------------------------------------------
William M. Fitzgerald+ 35 Vice President since 1996 Vice President of Nuveen
333 West Wacker Drive Advisory Corp. (since
Chicago, IL 60606 December 1995); prior
thereto, Assistant Vice
President of
Nuveen Advisory Corp.
(from September 1992 to
December 1995);
Chartered Financial
Analyst.
- ---------------------------------------------------------------------------------------
Stephen D. Foy+ 44 Vice President and Controller Vice President of John
333 West Wacker Drive since 1998 Nuveen & Co.
Chicago, IL 60606 Incorporated and (since
May 1998) The John
Nuveen Company;
Certified Public
Accountant.
- --------------------------------------------------------------------------------
J. Thomas Futrell+ 43 Vice President since 1991 Vice President of Nuveen
333 West Wacker Drive Advisory Corp.;
Chicago, IL 60606 Chartered Financial
Analyst.
- ---------------------------------------------------------------------------------------
Richard A. Huber+ 36 Vice President since 1997 Vice President of Nuveen
333 West Wacker Drive Institutional Advisory
Chicago, IL 60606 Corp. (since March 1998)
and Nuveen Advisory
Corp. (since January
1997); prior thereto,
Vice President and
Portfolio Manager of
Flagship Financial, Inc.
- ---------------------------------------------------------------------------------------
Steven J. Krupa+ 41 Vice President since 1990 Vice President of Nuveen
333 West Wacker Drive Advisory Corp.
Chicago, IL 60606
</TABLE>
- --------------------------------------------------------------------------------
S-21
<PAGE>
<TABLE>
- -----------------------------------------------------------------------------------
<CAPTION>
Positions and Principal Occupations
Name and Address Age Offices with Fund During Past Five Years
- -----------------------------------------------------------------------------------
<C> <C> <C> <S>
Larry W. Martin+ 47 Vice President and Asst. Vice President,
333 West Wacker Drive Secretary since 1993 Assistant Secretary and
Chicago, IL 60606 Assistant General
Counsel of John Nuveen &
Co. Incorporated; Vice
President and Assistant
Secretary of Nuveen
Advisory Corp. and
Nuveen Institutional
Advisory Corp.,
Assistant Secretary of
The John Nuveen Company
and (since January 1997)
Nuveen Asset Management
Inc.
- -----------------------------------------------------------------------------------
Edward F. Neild, IV+ 33 Vice President since 1996 Vice President of Nuveen
333 West Wacker Drive Advisory Corp. and
Chicago, IL 60606 Nuveen Institutional
Advisory Corp. (since
September 1996); prior
thereto, Assistant Vice
President of Nuveen
Advisory Corp. (from
December 1993 to
September 1996) and
Nuveen Institutional
Advisory Corp. (from May
1995 to September 1996);
Chartered Financial
Analyst.
- -----------------------------------------------------------------------------------
Stephen S. Peterson+ 41 Vice President since 1997 Vice President, (since
333 West Wacker Drive September 1997).
Chicago, IL 60606 Assistant Vice President
(from September 1996 to
September 1997), and
Portfolio Manager prior
thereto, of Nuveen
Advisory Corp.;
Chartered Financial
Analyst.
- -----------------------------------------------------------------------------------
Stuart W. Rogers+ 43 Vice President since 1997 Vice President of John
333 West Wacker Drive Nuveen & Co.
Chicago, IL 60606 Incorporated.
- -----------------------------------------------------------------------------------
Thomas C. Spalding Jr.+ 47 Vice President since 1980 Vice President of Nuveen
333 West Wacker Drive Advisory Corp. and
Chicago, IL 60606 Nuveen Institutional
Advisory Corp.;
Chartered Financial
Analyst.
- -----------------------------------------------------------------------------------
William S. Swanson+ 33 Vice President since 1998 Vice President of John
333 West Wacker Drive Nuveen & Co.
Chicago, IL 60606 Incorporated (since
October 1997); Assistant
Vice President (from
September 1996 to
October 1997) and
formerly, Associate;
Chartered Financial
Analyst.
- -----------------------------------------------------------------------------------
Gifford R. Zimmerman+ 42 Vice President since 1993 and Vice President,
333 West Wacker Drive Secretary since 1998 Assistant Secretary and
Chicago, IL 60606 Associate General
Counsel, formerly
Assistant General
Counsel (since September
1997) of John Nuveen &
Co. Incorporated; Vice
President and Assistant
Secretary of Nuveen
Advisory Corp. and
Nuveen Institutional
Advisory Corp.;
Assistant Secretary of
The John Nuveen Company
(since May 1994);
Chartered Financial
Analyst.
</TABLE>
- --------------------------------------------------------------------------------
- --------
* Mr. Schwertfeger is an interested person of the Fund.
+ Person is an affiliate of the Fund and an affiliate of the adviser or prin-
cipal underwriter.
S-22
<PAGE>
Timothy R. Schwertfeger and Peter R. Sawers serve as members of the Executive
Committee of the Board of Trustees. The Executive Committee, which meets be-
tween regular meetings of the Board of Trustees, is authorized to exercise all
of the powers of the Board of Trustees provided that the scope of the powers of
the Executive Committee, unless otherwise specifically authorized by the full
Board, shall be limited to (i) emergency matters where assembling the full
Board in a timely manner is impracticable (and in which event management would
take all reasonable steps to quickly notify the individual Board members of the
actions taken by the Executive Committee), or (ii) matters of an administrative
or ministerial nature.
The trustees of the Trust are directors or trustees, as the case may be, of 36
Nuveen open-end fund portfolios and of 55 Nuveen closed-end funds. Mr.
Schwertfeger is also trustee of 11 Nuveen open-end and closed-end funds advised
by Nuveen Institutional Advisory Corp.
The following table sets forth compensation paid by the Fund, as its predeces-
sor, during the fiscal year ended February 28, 1999, to each of the trustees.
The Fund has no retirement or pension plans. The officers and trustees affili-
ated with Nuveen serve without any compensation from the Fund.
<TABLE>
<CAPTION>
Total Compensation
Compensation from the Fund and
from the Fund Complex Paid
Name of Board Member Fund to Trustees
- --------------------------------------------------------------------------------
<S> <C> <C>
Robert P. Bremner.............................. $597 $71,500
Lawrence H. Brown.............................. $642 $79,000
Anne E. Impellizzeri........................... $597 $71,500
Peter R. Sawers................................ $597 $72,000
William J. Schneider........................... $597 $71,500
Judith M. Stockdale............................ $597 $72,000
</TABLE>
Each trustee who is not affiliated with Nuveen or Nuveen Advisory receives a
fee. The Fund requires no employees other than its officers, all of whom are
compensated by Nuveen.
S-23
<PAGE>
INVESTMENT ADVISER AND INVESTMENT MANAGEMENT AGREEMENT
Nuveen Advisory acts as investment adviser for and manages the investment and
reinvestment of the Fund's assets. Nuveen Advisory also administers the Trust's
business affairs, provides office facilities and equipment and certain cleri-
cal, bookkeeping and administrative services, and permits any of its officers
or employees to serve without compensation as trustees or officers of the Trust
if elected to such positions.
Pursuant to an investment management agreement between Nuveen Advisory and the
Trust, the Fund has agreed to pay annual management fees at the rates set forth
below, which are based on the Fund's average daily net asset value:
<TABLE>
<CAPTION>
Average Daily Net Asset
Value Management Fee
- ------------------------------------------
<S> <C>
For the first $125 million 0.4000 of 1%
For the next $125 million 0.3875 of 1%
For the next $250 million 0.3750 of 1%
For the next $500 million 0.3625 of 1%
For the next $1 billion 0.3500 of 1%
For assets over $2 billion 0.3250 of 1%
</TABLE>
Through December 31, 1999, Nuveen Advisory has undertaken to reimburse Fund
expenses in an amount necessary to limit total operating expenses to .55 of 1%
of the Fund's daily net asset value. Thereafter, Nuveen Advisory may chose to
modify, continue or discontinue these reimbursements at its sole discretion.
Before June 1999, Nuveen Advisory's annual management fees were calculated at
the rates set forth below, which are based on the Fund's average daily net as-
set value:
<TABLE>
<CAPTION>
Average Daily Net Asset
Value Management Fee
- ------------------------------------------
<S> <C>
For the first $500 million .4000 of 1%
For the next $500 million .3750 of 1%
For assets over $1 billion .3500 of 1%
</TABLE>
For the periods before June 1999, Nuveen Advisory had agreed to waive all or a
portion of its management fee or reimburse certain expenses of the Fund in or-
der to prevent total operating expenses of (including Nuveen Advisory's manage-
ment fee, but excluding interest, taxes, fees incurred in acquiring and dispos-
ing of portfolio securities, any asset-based distribution or service fees and,
to the extent permitted, extraordinary expenses) in any fiscal year from ex-
ceeding .55 of 1% of the average daily net asset value of the Fund. Nuveen Ad-
visory could also voluntarily agree to reimburse additional expenses from time
to time, which could be terminated at any time in its discretion. For the last
three fiscal years, the Fund, as its predecessor, paid net management fees to
Nuveen Advisory as follows:
<TABLE>
<S> <C> <C> <C> <C> <C>
Management Fees
Net of Expense Reimbursement Fee Waivers and
Paid to Nuveen Advisory for the Expense Reimbursements for
Year Ended the Year Ended
------------------------------------------ ------------------------------------------------
2/28/97 2/28/98 2/28/99 2/28/97 2/28/98 2/28/99
- -----------------------------------------------------------------------------------------------------
$665,655 $539,739 $70,133 $82,256
</TABLE>
S-24
<PAGE>
Nuveen Advisory is a wholly owned subsidiary of John Nuveen & Co. Incorporated
("Nuveen"), the Fund's principal underwriter. Nuveen and its affiliates have
sponsored or underwritten more than $60 billion of investment company securi-
ties. Over 1,300,000 individuals have invested to date in Nuveen's funds and
trusts. Founded in 1898, Nuveen is a subsidiary of The John Nuveen Company
which, in turn, is approximately 78% owned by The St. Paul Companies, Inc.
("St. Paul"). St. Paul is located in St. Paul, Minnesota, and is principally
engaged in providing property-liability insurance through subsidiaries.
Nuveen Advisory's portfolio managers call upon the resources of Nuveen's Re-
search Department. The Nuveen Research Department reviews more than $100 bil-
lion in municipal bonds every year.
The Fund, the other Nuveen Funds, Nuveen Advisory, and other related entities
have adopted a code of ethics which essentially prohibits all Nuveen Fund man-
agement personnel, including Nuveen Fund portfolio managers, from engaging in
personal investments which compete or interfere with, or attempt to take ad-
vantage of, the Fund's anticipated or actual portfolio transactions, and is
designed to assure that the interest of Fund shareholders are placed before
the interest of Nuveen personnel in connection with personal investment trans-
actions.
PORTFOLIO TRANSACTIONS
Nuveen Advisory, in effecting purchases and sales of portfolio securities for
the account of the Fund, will place orders in such manner as, in the opinion
of management, will offer the best price and market for the execution of each
transaction. Portfolio securities will normally be purchased directly from an
underwriter or in the over-the-counter market from the principal dealers in
such securities, unless it appears that a better price or execution may be ob-
tained elsewhere. Portfolio securities will not be purchased from Nuveen or
its affiliates except in compliance with the Investment Company Act of 1940.
The Fund expects that all portfolio transactions will be effected on a princi-
pal (as opposed to an agency) basis and, accordingly, do not expect to pay any
brokerage commissions.
Purchases from underwriters will include a commission or concession paid by
the issuer to the underwriter, and purchases from dealers will include the
spread between the bid and asked price. Given the best price and execution ob-
tainable, it will be the practice of the Fund to select dealers which, in ad-
dition, furnish research information (primarily credit analyses of issuers and
general economic reports) and statistical and other services to Nuveen Adviso-
ry. It is not possible to place a dollar value on information and statistical
and other services received from dealers. Since it is only supplementary to
Nuveen Advisory's own research efforts, the receipt of research information is
not expected to reduce significantly Nuveen Advisory's expenses. While Nuveen
Advisory will be primarily responsible for the placement of the business of
the Fund, the policies and practices of Nuveen Advisory in this regard must be
consistent with the foregoing and will, at all times, be subject to review by
the Board of Trustees.
Nuveen Advisory reserves the right to, and does, manage other investment ac-
counts and investment companies for other clients, which may have investment
objectives similar to the Fund. Subject to applicable laws and regulations,
Nuveen Advisory will attempt to allocate equitably portfolio transac-
S-25
<PAGE>
tions among the Fund and the portfolios of its other clients purchasing or
selling securities whenever decisions are made to purchase or sell securities
by the Fund and one or more of such other clients simultaneously. In making
such allocations the main factors to be considered will be the respective in-
vestment objectives of the Fund and such other clients, the relative size of
portfolio holdings of the same or comparable securities, the availability of
cash for investment by the Fund and such other
clients, the size of investment commitments generally held by the Fund and
such other clients and
opinions of the persons responsible for recommending investments to the Fund
and such other clients.
While this procedure could have a detrimental effect on the price or amount of
the securities available to the Fund from time to time, it is the opinion of
the Board of Trustees that the benefits available from Nuveen Advisory's or-
ganization will outweigh any disadvantage that may arise from exposure to si-
multaneous transactions.
Under the Investment Company Act of 1940, the Fund may not purchase portfolio
securities from any underwriting syndicate of which Nuveen is a member except
under certain limited conditions set forth in Rule 10f-3. The Rule sets forth
requirements relating to, among other things, the type of securities purchased
by the Fund and the amount of securities which may be purchased in any one is-
sue. In addition, purchases of securities made pursuant to the terms of the
Rule must be approved at least quarterly by the Board of Trustees, including a
majority of the trustees who are not interested persons of the Fund.
NET ASSET VALUE
As stated in the Prospectus, the net asset value of the shares of the Fund
will be determined by The Chase Manhattan Bank, the Fund's custodian, as of
12:00 noon, Eastern Time, (1) on each day on which the Federal Reserve Bank of
Boston is normally open and (2) on any day during which there is sufficient
degree of trading in the Fund's portfolio securities that the current net as-
set value of the Fund shares might be materially affected by such changes in
the value of the portfolio securities. The Federal Reserve Bank of Boston is
not open and the Fund will similarly not be open on New Year's Day, Martin Lu-
ther King's Birthday, Washington's Birthday, Good Friday, Memorial Day, Inde-
pendence Day, Labor Day, Columbus Day, Veteran's Day, Thanksgiving Day and
Christmas Day. It is possible that changing circumstances during the year will
result in addition or deletions to the above lists. The net asset value per
share will be computed by dividing the value of the portfolio securities held
by the Fund, plus cash or other assets, less liabilities, by the total number
of shares outstanding at such time.
As stated in the Prospectus, the Fund will seek to maintain a net asset value
of $1.00 per share. In this connection, the Fund values its portfolio securi-
ties at their amortized cost, as permitted by the Securities and Exchange Com-
mission (the "Commission") under Rule 2a-7 under the Investment Company Act of
1940. This method does not take into account unrealized securities gains or
losses. It involves valuing an instrument at its cost on the date of purchase
and thereafter assuming a constant amortization to maturity of any discount or
premium. While this method provides certainty in valuation, it may result in
periods during which the value of an investment, as determined by amortized
cost, is higher or lower than the price the Fund would receive if it sold the
instrument. During periods of declining interest rates, the daily yield on
shares of the Fund may tend to be higher than a like computation made by a
S-26
<PAGE>
fund with identical investments utilizing a method of valuation based upon mar-
ket prices and estimates of market prices for all of its portfolio instruments.
Thus, if the use of the amortized cost method by the Fund resulted in a lower
aggregate portfolio value on a particular day, a prospective investor in the
Fund would be able to obtain a somewhat higher yield than would result from an
investment in a fund utilizing solely market values, and existing investors in
the Fund would receive less investment income. The converse would apply in a
period of rising interest rates.
The Fund, as a condition to the use of amortized cost and the maintenance of
its per share net asset value of $1.00, must maintain a dollar-weighted average
portfolio maturity of 90 days or less, only purchase instruments having remain-
ing maturities of 397 days or less, and invest only in securities determined to
be of high quality with minimal credit risks. The Fund may invest in variable
and floating rate instruments even if they carry stated maturities in excess of
397 days, upon certain conditions contained in rules and regulations issued by
the Securities and Exchange Commission under the Investment Company Act of
1940, but will do so only if there is a secondary market for such instruments
or if they carry demand features, permissible under rules of the Commission for
money market funds, to recover the full principal amount thereof upon specified
notice at par, or both.
The Board of Trustees, pursuant to Rule 2a-7, has established procedures de-
signed to stabilize, to the extent reasonably possible, the Fund's price per
share as computed for the purpose of sales and redemptions at $1.00. Such pro-
cedures will include review of the Fund's portfolio holdings by the Board of
Trustees, at such intervals as it may deem appropriate, to determine whether
the net asset value calculated by using available market quotations or market
equivalents deviates from $1.00 per share based on amortized cost. Market quo-
tations and market equivalents used in such review may be obtained from a pric-
ing agent approved by the Board of Trustees. The Board has selected Nuveen Ad-
visory to act as pricing agent, but in the future may select an independent
pricing service to perform this function. In serving as pricing agent, Nuveen
Advisory will follow guidelines adopted by the Board, and the Board will moni-
tor Nuveen Advisory to see that the guidelines are followed. The pricing agent
will value the Fund's investment based on methods which include consideration
of yield or prices of municipal obligations of comparable quality, coupon, ma-
turity, and type; indications as to values from dealers; and general market
conditions. The pricing agent may employ electronic data processing techniques
and/or a matrix system to determine valuations. The extent of any deviation be-
tween the Fund's net asset value based on the pricing agent's market valuation
and $1.00 per share based on amortized cost will be examined by the Board of
Trustees. If such deviation exceeds 1/2 of 1%, the Board of Trustees will
promptly consider what action, if any, will be initiated. In the event the
Board of Trustees determines that a deviation exists which may result in mate-
rial dilution or other unfair results to investors or existing shareholders, it
has agreed to take such corrective action as it regards as necessary and appro-
priate, including the sale of portfolio instruments prior to maturity to real-
ize capital gains or losses or to shorten average portfolio maturity.
TAX MATTERS
Federal Income Tax Matters
The following discussion of federal income tax matters is based upon the advice
of Morgan, Lewis & Bockius LLP, Washington, D.C., counsel to the Fund.
S-27
<PAGE>
As described in the Prospectus, the Fund intends to qualify, as it has in prior
years, under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code") for tax treatment as a regulated investment company. In order to qual-
ify as a regulated investment company, the Fund must satisfy certain require-
ments relating to the source of its income, diversification of its assets, and
distributions of its income to shareholders. First, the Fund must derive at
least 90% of its annual gross income (including tax-exempt interest) from divi-
dends, interest, payments with respect to securities loans, gains from the sale
or other disposition of stock or securities, foreign currencies or other income
(including but not limited to gains from options and futures) derived with re-
spect to its business of investing in such stock or securities (the "90% gross
income test"). Second, the Fund must diversify its holdings so that, at the
close of each quarter of its taxable year, (i) at least 50% of the value of its
total assets is comprised of cash, cash items, United States Government securi-
ties, securities of other regulated investment companies and other securities
limited in respect of any one issuer to an amount not greater in value than 5%
of the value of the Fund's total assets and to not more than 10% of the out-
standing voting securities of such issuer, and (ii) not more than 25% of the
value of its total assets is invested in the securities of any one issuer
(other than United States Government securities and securities of other regu-
lated investment companies) or two or more issuers controlled by the Fund and
engaged in the same, similar or related trades or businesses.
As a regulated investment company, the Fund will not be subject to federal in-
come tax on the portion of its net income currently distributed to shareholders
in any taxable year for which it distributes at least 90% of the sum of (i) its
"investment company taxable income" (which includes dividends, taxable inter-
est, taxable original issue discount and market discount income, income from
securities lending, net short-term capital gain in excess of long-term capital
loss, and any other taxable income other than "net capital gain" (the excess of
its net long-term capital gains over its net short-term capital loss) and is
reduced by deductible expenses) and (ii) its "net tax-exempt interest" (the ex-
cess of its gross tax-exempt interest income over certain disallowed deduc-
tions).
The Fund also intends to satisfy conditions that will enable it to designate
certain distributions as exempt-interest dividends. Shareholders receiving ex-
empt-interest dividends will not be subject to regular federal income tax on
the amount of such dividends.
Distributions by the Fund of net interest received from certain taxable invest-
ments (such as certificates of deposit, commercial paper and obligations of the
United States Government, its agencies and instrumentalities) and net short-
term capital gains realized by the Fund, if any, will be taxable to sharehold-
ers as ordinary income whether received in cash or additional shares. If the
Fund purchases a security at a market discount, any gain realized by the Fund
upon sale or redemption of the securities will be treated as a taxable interest
income to the extent such gain does not exceed the market discount, and any
gain realized in excess of the market discount will be treated as a capital
gain. Any net long-term capital gains realized by the Fund and distributed to
shareholders in cash or in additional shares will be taxable to shareholders as
long-term capital gains regardless of the length of time investors have owned
shares of the Fund. The Fund does not expect to realize significant long-term
capital gains. Because the taxable portion of the Fund's investment income con-
sists primarily of interest, none of its dividends, whether or not treated as
exempt-interest dividends, is expected to qualify under the Internal Revenue
Code for the dividends received deductions for corporations.
S-28
<PAGE>
If the Fund has both tax-exempt and taxable income, it will use the "average
annual" method for determining the designated percentage that is taxable income
and designate the use of such method within 60 days after the end of the Fund's
taxable year. Under this method, one designated percentage is applied uniformly
to all distributions made during the Fund's taxable year. The percentage of in-
come designated as tax-exempt for any particular distribution may be substan-
tially different from the percentage of the Fund's income that was tax-exempt
during the period covered by the distribution.
Although dividends generally will be treated as distributed when paid, divi-
dends declared in October, November or December, payable to shareholders of
record on a specified date in one of those months and paid during the following
January, will be treated as having been distributed by the Fund (and received
by the shareholders) on December 31.
The redemption or exchange of the shares of the Fund is not expected to result
in capital gain or loss to the shareholders because the Fund's net asset value
is expected to remain constant at $1.00 per share. To the extent that the
Fund's net asset value is greater or lesser than $1.00 per share, redemptions
or exchanges may result in capital gain or loss to the shareholder.
In order to avoid a 4% federal excise tax, the Fund must distribute or be
deemed to have distributed by December 31 of each calendar year at least 98% of
its taxable ordinary income for such year, at least 98% of the excess of its
realized capital gains over its realized capital losses (generally computed on
the basis of the one-year period ending on October 31 of such year) and 100% of
any taxable ordinary income and the excess of realized capital gains over real-
ized capital losses for the period year that was not distributed during such
year and on which the Fund paid no federal income tax. The Fund intends to make
timely distributions in compliance with these requirements and consequently it
is anticipated that it generally will not be required to pay the excise tax.
If in any year the Fund should fail to qualify under Subchapter M for tax
treatment as a regulated investment company, the Fund would incur a regular
corporate federal income tax upon its income for that year (other than interest
income from tax-exempt securities), and distributions to its shareholders out
of net interest income from tax-exempt securities or other investments, or out
of net capital gains, would be taxable to shareholders as ordinary dividend in-
come for federal income tax purposes to the extent of the Fund's available
earnings and profits.
The Fund may invest in the type of private activity bonds the interest on which
is not federally tax-exempt to persons who are "substantial users" of the fa-
cilities financed by such bonds or "related persons" of such "substantial us-
ers." Accordingly, the Funds may not be appropriate investments for a share-
holder who is considered either a "substantial user" or a "related person"
within the meaning of the Code. In general, a "substantial user" of a facility
financed from the proceeds of private activity bonds includes a "non-exempt
person who regularly uses a part of such facility in his trade or business."
"Related persons" are in general defined to include persons among whom there
exists a relationship either by family or business, which would result in a
disallowance of losses in transactions among them under various provisions of
the Code (or if they are members of the same controlled group of corporations
under the Code). This includes a partnership and each of its partners (includ-
ing their spouses and minor children) and an S corporation and each of its
shareholders (and their spouses and minor children). Various combinations of
these relationships may also constitute "related persons" under the Code. For
additional information, investors should consult their tax advisers before in-
vesting in the Fund.
S-29
<PAGE>
Federal tax law imposes an alternative minimum tax with respect to both corpo-
rations and individuals. Interest on certain securities, such as bonds issued
to make loans for housing purposes or to private entities (but not for certain
tax-exempt organizations such as universities and non-profit hospitals), is in-
cluded as an item of tax preference in determining the amount of a taxpayer's
alternative minimum taxable income. To the extent that the Fund receives income
from securities subject to the alternative minimum tax, a portion of the divi-
dends paid by it, although otherwise exempt from federal income tax, will be
taxable to shareholders to the extent that their tax liability is determined
under the alternative minimum tax regime. The Fund will annually supply share-
holders with a report indicating the percentage of the Fund income attributable
to securities subject to the federal alternative minimum tax.
In addition, the alternative minimum taxable income for corporations is in-
creased by 75% of the difference between an alternative measure of income ("ad-
justed current earnings") and the amount otherwise determined to be the alter-
native minimum taxable income. Interest on all securities, and therefore all
distributions by the Fund that would otherwise be tax exempt, is included in
calculating a corporation's adjusted current earnings.
Individuals whose provisional income exceeds a base amount will be subject to
Federal income tax on up to one-half of their social security or railroad re-
tirement benefits. Provisional income currently includes adjusted gross income,
one-half of social security benefits and tax-exempt interest, including exempt-
interest dividends from the Fund. Individuals whose modified income exceeds an
adjusted base amount are required to include in gross income up to 85% of their
social security or railroad benefits.
The Code provides that interest on indebtedness incurred or continued to pur-
chase or carry shares of any Fund is not deductible. Under rules used by the
IRS for determining when borrowed funds are considered used for the purpose of
purchasing or carrying particular assets, the purchase of shares of the Fund
may be considered to have been made with borrowed funds even though such funds
are not directly traceable to the purchase of shares.
The Fund is required in certain circumstances to withhold 31% of taxable divi-
dends and certain other payments paid to non-corporate holders of shares who
have not furnished to the Fund their correct taxpayer identification number (in
the case of individuals, their social security number) and certain certifica-
tions, or who are otherwise subject to back-up withholding.
The foregoing is a general and abbreviated summary of the provisions of the
Code and Treasury Regulations presently in effect as they directly govern the
taxation of the Fund and their shareholders. For complete provisions, reference
should be made to the pertinent Code sections and Treasury Regulations. The
Code and Treasury Regulations are subject to change by legislative or adminis-
trative action, and any such change may be retroactive with respect to Fund
transactions. Shareholders are advised to consult their own tax advisers for
more detailed information concerning the federal taxation of the Fund and the
income tax consequences to their shareholders.
State Tax Matters
The following is based upon the advice of Morgan, Lewis & Bockius LLP, Washing-
ton, D.C., counsel to the Fund, and assumes that the Fund will be qualified as
a regulated investment company under Subchapter M of the Code and will be qual-
ified thereunder to pay exempt interest dividends.
S-30
<PAGE>
Individual shareholders of the Fund who are subject to California personal in-
come taxation will not be required to include in their California gross income
dividends which (1) are attributable to interest on any obligation of Califor-
nia or its political subdivisions or to interest on obligations of the United
States, its territories, possessions or instrumentalities that are exempt from
state taxation under federal law, and (2) are designated by the Fund as Cali-
fornia exempt-interest dividends in a written notice mailed to shareholders not
later than 60 days after the close of the Fund's taxable year. Gain or loss, if
any, resulting from an exchange or redemption of shares will be recognized in
the year of the exchange or redemption. Present California law taxes both long-
term and short-term capital gains on the exchange or redemption of shares at
rates applicable to ordinary income. Interest on indebtedness incurred or con-
tinued by a shareholder in connection with the purchase of shares of the Fund
will not be deductible for California personal income tax purposes. California
has an alternative minimum tax similar to the federal alternative minimum tax.
However, the California alternative minimum tax does not include tax-exempt in-
terest as an item of tax preference.
The Fund will not be subject to California franchise or corporate income tax on
interest income or net capital gain distributed to the shareholders.
Shares of the Fund will be exempt from ad valorem taxes in California.
The foregoing is a general, abbreviated summary of certain of the provisions of
the California Revenue and Taxation Code presently in effect as it directly
governs the taxation of shareholders of the Fund. These provisions are subject
to change by legislative or administrative action, and any such change may be
retroactive with respect to Fund transactions. Shareholders are advised to con-
sult with their own tax advisers for more detailed information concerning Cali-
fornia tax matters.
PERFORMANCE INFORMATION
The historical performance of the Fund may be expressed in terms of "yield,"
"effective yield" or "taxable equivalent yield." The "yield" of the Fund refers
to the rate of income generated by an investment in the series over a specified
seven-day period, expressed as an annualized figure. "Effective yield" is cal-
culated similarly except that, when annualized, the income earned by the in-
vestment is assumed to be reinvested. Due to this compounding effect, the ef-
fective yield will be slightly higher than the yield. "Taxable equivalent
yield" is the yield that a taxable investment would need to generate in order
to equal the series' yield on an after-tax basis for an investor in a stated
bracket) often the bracket with the highest marginal tax rate). A taxable
equivalent yield quotation for a given series will be higher than the yield or
the effective yield quotation for the series. The yield figures will fluctuate
over time. A comparison of tax-exempt and taxable equivalent yields is one ele-
ment to consider in making an investment decision. The Fund may from time to
time in its advertising and sales materials compare the then current yield as
of the most recent quarter of the Fund with the yield on taxable investments
such as corporate or U.S. Government bonds, bank CDs and money market accounts
or money market funds, each of which has investment characteristics that may
differ from those of the Fund. U.S. Government bonds, for example, are backed
by the full faith and credit of the U.S. Government and bank CDs and money mar-
ket accounts are insured by an agency of the federal government. Bank money
market accounts and money market funds provide stability of principal, but pay
interest at rates that vary with the condition of the short-term taxable debt
market. The investment characteristics of the Fund are described more fully
elsewhere in this Prospecuts.
S-31
<PAGE>
Any given performance quotation or performance comparison for the Fund is based
on historical earnings and should not be considered as representative of the
performance of the Fund for any future period.
Yield is computed in accordance with a standard method prescribed by rules of
the Securities and Exchange Commission. Under that method, current yield is
based on a seven-day period and is computed as follows: the series' net invest-
ment income per share for the period is divided by the price per share (ex-
pected to remain constant at $1.00) at the beginning of the period, the result
(the "base period return") is divided by seven and multiplied by 365, and the
resulting figure is carried to the nearest hundredth of one percent. For the
purpose of this calculation, the series' net investment income per share in-
cludes its accrued interest income plus or minus amortized purchase discount or
premium less accrued expenses, but does not include realized capital gains or
losses or unrealized appreciation or depreciation of investments.
Effective yield is calculated by taking the base period return (computed as de-
scribed above) and calculating the effect of assumed compounding. The formula
for effective yield is: (base period return +1) 365/7 -1. Based on the seven-
day period ended , 1999, the yield and effective yield was % and
%, respectively.
Taxable equivalent yield is computed by dividing that portion of the Fund's
yield which is tax-exempt by 1 minus the stated combined federal and state in-
come tax rate and adding the result to that portion, if any, of the yield of
the fund that is not tax-exempt. Based upon (1) a combined 1999 federal and
California income tax of 45.2%, and (2) the yield for the fund as described
above for the seven-day period ended February 28, 1999, the taxable equivalent
yield for the Fund for that period was [5.53]%.
Yield will fluctuate, and the publication of annualized yield quotations is not
a representation of what an investment in the fund will actually yield for any
given future period. Actual yields will depend not only on changes in interest
rates on money market instruments during the period in question, but also on
such matters as the expenses attributable to the fund.
In reports or other communications to shareholders or in advertising and sales
literature, the fund may compare its performance to that of other money market
mutual funds tracked by Lipper Analytical Services, Inc. ("Lipper"), by
Donoghue's Money fund Report ("Donoghue's") or similar services or by financial
publications such as Barron's, Changing Times, Forbes and Money Magazine. Per-
formance comparisons by these indexes, services or publications may rank mutual
funds over different periods of time by means of aggregate, average, year-by-
year or other types of performance figures. Lipper performance calculations in-
clude the reinvestment of all capital gain and income dividends for the periods
covered by the calculations. As reported by Donoghue's all investment results
represent total return (annualized results for the period net of management
fees and expenses) and one year investment results are effective annual yields
assuming reinvestment of dividends.
A comparison of tax-exempt and taxable equivalent yields is one element to con-
sider in making an investment decision. The fund may from time to time in its
advertising and sales materials compare its then current yields as of a recent
date with the yields on taxable investments such as corporate or U.S.
S-32
<PAGE>
Government bonds and bank CDs or money market accounts, each of which has in-
vestment characteristics that may differ from those of the fund. U.S. Govern-
ment bonds, for example, are backed by the full faith and credit of the U.S.
Government, and bank CDs and money market accounts are generally shorter term
investments insured by an agency of the federal government. Bank money market
accounts and money market funds provide stability of principal but pay interest
at rates which vary with the condition of the short-time taxable debt market.
The following table shows the effects for individuals of federal income taxes
on the amount that those subject to a given tax rate would have to put into a
tax-free investment in order to generate the same after-tax income as a taxable
investment.*
Read down to find the amount of a tax-free investment at the specified rate
that would provide the same after-tax income as a $50,000 taxable invest-
ment at the stated taxable rate.
<TABLE>
<CAPTION>
3.00% 3.50% 4.00% 4.50% 5.00% 5.50% 6.00% 6.50%
1.50% 2.00% 2.50% Tax- Tax- Tax- Tax- Tax- Tax- Tax- Tax-
Taxable Tax-Free Tax-Free Tax-Free Free Free Free Free Free Free Free Free
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2.00% $ 46,000 $ 34,500 $ 27,600 $23,000 $19,714 $17,250 $15,333 $13,800 $12,545 $11,500 $10,615
- ------------------------------------------------------------------------------------------------------
2.50% $ 57,500 $ 43,125 $ 34,500 $28,750 $24,643 $21,563 $19,167 $17,250 $15,682 $14,375 $13,269
- ------------------------------------------------------------------------------------------------------
3.00% $ 69,000 $ 51,750 $ 41,400 $34,500 $29,571 $25,875 $23,000 $20,700 $18,818 $17,250 $15,923
- ------------------------------------------------------------------------------------------------------
3.50% $ 80,500 $ 60,375 $ 48,300 $40,250 $34,500 $30,188 $26,833 $24,150 $21,955 $20,125 $18,262
- ------------------------------------------------------------------------------------------------------
4.00% $ 92,000 $ 69,000 $ 55,200 $46,000 $39,429 $34,500 $30,667 $27,600 $25,091 $23,000 $21,231
- ------------------------------------------------------------------------------------------------------
4.50% $103,500 $ 77,625 $ 62,100 $51,750 $44,357 $38,813 $34,500 $31,050 $28,227 $25,875 $23,884
- ------------------------------------------------------------------------------------------------------
5.00% $115,000 $ 86,250 $ 69,000 $57,500 $49,286 $43,125 $38,333 $34,500 $31,364 $28,750 $26,538
- ------------------------------------------------------------------------------------------------------
5.50% $126,500 $ 94,875 $ 75,900 $63,250 $54,214 $47,437 $42,167 $37,950 $34,500 $31,625 $29,192
- ------------------------------------------------------------------------------------------------------
6.00% $138,000 $103,500 $ 82,800 $69,000 $59,143 $51,750 $46,000 $41,400 $37,636 $34,500 $31,846
- ------------------------------------------------------------------------------------------------------
6.50% $149,500 $112,125 $ 89,700 $74,750 $64,071 $56,062 $49,833 $44,850 $40,773 $37,375 $34,500
- ------------------------------------------------------------------------------------------------------
7.00% $161,000 $120,750 $ 96,600 $80,500 $69,000 $60,375 $53,667 $48,300 $43,909 $40,250 $37,154
- ------------------------------------------------------------------------------------------------------
7.50% $172,500 $129,375 $103,500 $86,250 $73,929 $64,688 $57,500 $51,750 $47,045 $43,125 $39,808
- ------------------------------------------------------------------------------------------------------
8.00% $184,000 $138,000 $110,400 $92,000 $78,857 $69,000 $61,333 $55,200 $50,182 $46,000 $42,462
- ------------------------------------------------------------------------------------------------------
</TABLE>
*The dollar amounts in the table reflect a 31% federal income tax rate.
This table is for illustrative purposes only and is not intended to predict the
actual return you might earn on your investment. The Fund occasionally may ad-
vertise its performance in similar tables using a different current tax rate
than that shown here. The tax rate shown here may be higher or lower than your
actual tax rate; a higher tax rate would tend to make the dollar amounts in the
table lower, while a lower tax rate would make the amounts higher. You should
consult your tax adviser to determine your actual tax rate.
Taxable Equivalent Yield Tables
The following tables show the combined effects for individuals of federal and
state income taxes on:
. what you would have to earn on a taxable investment to equal a given tax-
free yield; and
. the amount that those subject to a given combined tax rate would have to
put into a tax-free investment in order to generate the same after-tax in-
come as a taxable investment.
S-33
<PAGE>
These tables are for illustrative purposes only and are not intended to predict
the actual return you might earn on a fund investment. The funds occasionally
may advertise their performance in similar tables using other current combined
tax rates than those shown here. The combined tax rates used in these tables
have been rounded to the nearest one-half of one percent. They are based upon
published 1999 marginal federal tax rates and marginal state tax rates cur-
rently available and scheduled to be in effect, and do not take into account
changes in tax rates that are proposed from time to time. A taxpayer's marginal
tax rate is affected by both his taxable income and his adjusted gross income.
The table assumes that federal taxable income is equal to state income subject
to tax, and for cases in which more than one state rate falls within a federal
bracket, the highest state rate corresponding to the highest income within that
federal bracket is used. The tables assume taxpayers are not subject to any al-
ternative minimum taxes and deduct any state income taxes paid on their federal
income tax returns. Unless noted otherwise, the tables do not reflect any local
taxes or any taxes other than personal income taxes. They also reflect the ef-
fect of the current federal tax limitations on itemized deductions and personal
exemptions, which were designed to phase out certain benefits of these deduc-
tions for higher income taxpayers. These limitations are subject to certain
maximums, which depend on the number of exemptions claimed and the total amount
of the taxpayer's itemized deductions. For example, the limitation on itemized
deductions will not cause a taxpayer to lose more than 80% of his allowable
itemized deductions, with certain exceptions. The combined tax rates shown here
may be higher or lower than your actual combined tax rate. A higher combined
tax rate would tend to make the dollar amounts in the third table lower, while
a lower combined tax rate would make the amounts higher. You should consult
your tax adviser to determine your actual combined tax rate.
Combined federal and California state marginal tax rates for joint taxpayers
with four personal exemptions.
<TABLE>
<CAPTION>
Tax-Free Yield
Federal Combined 2.00% 2.50% 3.00% 3.50% 4.00% 4.50% 5.00% 5.50%
Federal Adjusted State and
Taxable Gross Federal -----------------------------------------------
Income Income Tax Rate** Taxable Equivalent Yield
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0-
42,350 $ 0-124,500 20.0% 2.50 3.13 3.75 4.38 5.00 5.63 6.25 6.88
42,350-
102,300 0-124,500 34.5 3.05 3.82 4.58 5.34 6.11 6.87 7.63 8.40
124,500-188,800 35.5 3.10 3.88 4.65 5.43 6.20 6.98 7.75 8.53
102,300-
155,950 0-124,500 37.5 3.20 4.00 4.80 5.60 6.40 7.20 8.00 8.80
124,500-186,800 38.5 3.25 4.07 4.88 5.69 6.50 7.32 8.13 8.94
188,800-228,305 40.5 3.36 4.20 5.04 5.88 6.72 7.56 8.40 9.24
228,305-265,805 41.5 3.42 4.27 5.13 5.98 6.84 7.69 8.55 9.40
265,805-309,300 41.0 3.39 4.24 5.08 5.93 6.78 7.63 8.47 9.32
155,950-
278,450 124,500-186,800 43.0 3.51 4.39 5.26 6.14 7.02 7.89 8.77 9.65
186,800-228,305 46.0 3.70 4.65 5.56 6.48 7.41 8.35 9.26 10.19
228,305-265,805 46.5 3.74 4.67 5.61 6.54 7.48 8.41 9.35 10.28
265,805-309,300 46.0 3.70 4.63 5.56 6.48 7.41 8.33 9.26 10.19
Over 309,300 43.5 3.54 4.42 5.31 6.19 7.08 7.96 8.85 9.73
Over
278,450 186,800-228,305 49.5 3.96 4.95 5.94 6.93 7.92 8.91 9.90 10.89
228,305-265,805 50.5 4.04 5.05 6.06 7.07 8.08 9.09 10.10 11.11
265,805-309,300 49.5 3.96 4.95 5.94 6.93 7.92 8.91 9.90 10.89
Over 309,300 46.5 3.74 4.67 5.61 6.54 7.48 8.41 9.35 10.28
- --------------------------------------------------------------------------------------
</TABLE>
S-34
<PAGE>
Combined federal and California marginal tax rates for single taxpayers with
one personal exemption.
<TABLE>
<CAPTION>
Tax-Free Yield
Federal Combined 2.00% 2.50% 3.00% 3.50% 4.00% 4.50% 5.00% 5.50%
Federal Adjusted State and
Taxable Gross Federal -----------------------------------------------
Income Income Tax Rate** Taxable Equivalent Yield
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0-
25,350 $ 0-114,152 20.0% 2.50 3.13 3.75 4.38 5.00 5.63 6.25 6.88
25,350-
61,400 0-114,152 34.5 3.05 3.82 4.58 5.34 6.11 6.87 7.63 8.40
61,400-
128,100 0-114,152 37.5 3.20 4.00 4.80 5.60 6.40 7.20 8.00 8.80
114,152-124,500 38.0 3.23 4.03 4.84 5.65 6.45 7.26 8.06 8.87
124,500-141,652 39.5 3.31 4.13 4.96 5.79 6.61 7.44 8.26 9.09
141,652-247,000 39.0 3.28 4.10 4.92 5.74 6.56 7.38 8.20 9.02
128,100-
278,450 124,500-141,652 44.0 3.57 4.46 5.36 6.25 7.14 8.04 8.93 9.82
141,652-247,000 44.0 3.57 4.46 5.36 6.25 7.14 8.04 8.93 9.82
Over 247,000 43.5 3.54 4.42 5.31 6.19 7.08 7.96 8.85 9.73
Over
278,450 Over 247,000 46.5 3.74 4.67 5.61 6.54 7.48 8.41 9.35 10.28
- --------------------------------------------------------------------------------------
</TABLE>
For an equal after-tax return, your tax-free investment may be less.*
<TABLE>
<CAPTION>
For an after-tax
return equal to Your tax-free investment may be less*
that provided by a 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0%
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$50,000 in a 4%
taxable investment $ 62,500 $ 50,000 $41,667 $35,714 $31,250 $27,778 $25,000
$50,000 in a 5%
taxable investment 78,125 62,500 52,083 44,643 39,063 34,722 31,250
$50,000 in a 6%
taxable investment 93,750 75,000 62,500 53,571 46,875 41,667 37,500
$50,000 in a 7%
taxable investment 109,375 87,500 72,917 62,500 54,688 48,611 43,750
$50,000 in a 8%
taxable investment 125,000 100,000 83,333 71,429 62,500 55,556 50,000
- ------------------------------------------------------------------------------
</TABLE>
* Dollar amounts in the table reflect a 37.5% combined federal and state tax
rate.
** The State tax brackets are those for 1997. The 1998 brackets will be ad-
justed to take into account changes in the California Consumer Price Index.
These adjustments have not yet been released.
For example, $50,000 in a 6% taxable investment earns the same after-tax return
as $37,500 in a 5% tax-free Nuveen investment.
S-35
<PAGE>
ADDITIONAL INFORMATION ABOUT PURCHASES AND SALES
Exchange Privileges
You may exchange shares of the fund for the appropriate class of shares of any
other open-end management investment company with reciprocal exchange privi-
leges advised by Nuveen Advisory (the "Nuveen Funds"), into an identically reg-
istered account, provided that the Nuveen Fund into which shares are to be ex-
changed is offered in the shareholder's state of residence and that the shares
to be exchanged have been held by the shareholder for a period of at least 15
days. You may exchange fund shares by calling (800) 257-8787 or by mailing your
written request to our Transfer Agent. Shares of Nuveen Funds purchased subject
to a front-end sales charge may be exchanged for shares of the fund or any
other Nuveen Fund at the next determined net asset value without any front-end
sales charge. No CDSC otherwise applicable will be assessed on an exchange, and
the holding period of your investment will be carried over to the new fund for
purposes of determining any future CDSC. You may exchange Class B shares for
shares of a Nuveen money market fund. Shares of any Nuveen Fund purchased
through dividend reinvestment or through reinvestment of Nuveen Unit Trust dis-
tributions (and any dividends thereon) may be exchanged for Class A shares of
any Nuveen Fund without a front-end sales charge. Exchanges of shares with re-
spect to which no front-end sales charge has been paid will be made at the pub-
lic offering price, which may include a front-end sales charge, unless a front-
end sales charge has previously been paid on the investment represented by the
exchanged shares (i.e., the shares to be exchanged were originally issued in
exchange for shares on which a front-end sales charge was paid), in which case
the exchange will be made at net asset value. Because certain other Nuveen
Funds may determine net asset value and therefore honor purchase or redemption
requests on days when the fund does not (generally, Martin Luther King's Birth-
day, Columbus Day and Veterans Day), exchanges of shares of one of those funds
for shares of the fund may not be effected on such days.
The total value of shares being exchanged must at least equal the minimum in-
vestment requirement of the Nuveen Fund into which they are being exchanged.
Exchanges are made based on the relative dollar values of the shares involved
in the exchange, and will be effected by redemption of shares of the Nuveen
Fund held and purchase of the shares of the other Nuveen Fund. For federal in-
come tax purposes, any such exchange constitutes a sale and purchase of shares
and may result in capital gain or loss. Before exercising any exchange, you
should obtain the Prospectus for the Nuveen Fund into which shares are to be
exchanged and read it carefully. If the registration of the account for the
fund you are purchasing is not exactly the same as that of the fund account
from which the exchange is made, written instructions from all holders of the
account from which the exchange is being made must be received, with signatures
guaranteed by a member of an approved Medallion Guarantee Program or in such
other manner as may be acceptable to the fund. The exchange privilege may be
modified or discontinued at any time. If you do not wish to have telephone ex-
change privileges, you must indicate this in the "Telephone Services" section
of your Account Application or otherwise notify the Fund in writing of your
desire.
Additional Information
An account will be maintained for each shareholder of record in the fund by our
Transfer Agent. Share certificates will be issued only upon written request of
the shareholder to our Transfer Agent. No
S-36
<PAGE>
certificates are issued for fractional shares. The Fund reserves the right to
reject any purchase order and to waive or increase minimum investment require-
ments.
Confirmations of each purchase and redemption order as well as monthly state-
ments are sent to every shareholder. Master accounts also receive a monthly
summary report setting forth the share balance and dividends earned for the
month for each sub-account established under that master account.
To assist those institutions performing their own-sub-accounting, same day in-
formation as to the fund's daily per share income to seven decimal places and
the one-day yield to four decimal places are normally available by 3:30 p.m.,
Eastern Time.
A change in registration or transfer of shares held in the name of a
broker/dealer can only be effected by an order in good form from the
broker/dealer acting on behalf of the investor. Broker/dealers are encouraged
to open single master accounts. However, some broker/dealers may wish to use
our Transfer Agent's sub-accounting system to minimize their internal record-
keeping requirements. A broker/dealer or other investor requesting shareholder
servicing or accounting other than the master account or subaccounting service
offered by the fund will be required to enter into a separate agreement with
the agent for these services for a fee to be determined in accordance with the
level of services to be furnished.
Banks and other organizations through which investors may purchase shares of
the fund may impose charges in connection with purchase orders. Investors
should contact their institutions directly to determine what charges, if any,
may be imposed.
Subject to the rules of the SEC, the fund reserves the right to suspend the
continuous offering of the shares at any time, but such suspension shall not
affect the shareholder's right of redemption as described below. The fund also
reserves the right to reject any purchase order and to waive or increase mini-
mum investment requirements.
Telephone Redemption via Fund Direct
To redeem shares held in non-certificate form by telephone with the redemption
proceeds paid via Fund Direct-Electronic Funds Transfer, you must complete the
Telephone Services section of the enclosed Application Form and return it to
Nuveen or our Transfer Agent. If you did not authorize Telephone Redemption via
Fund Direct when you opened your account, you may do so by sending a written
request to the Fund signed by each account owner with signatures guaranteed by
a member of an approved Medallion Guarantee Program or in such other manner as
may be acceptable to the fund. Proceeds of share redemptions made by Fund Di-
rect will be transferred only to the commercial bank account specified by the
shareholder. Redemption proceeds may be delayed one additional business day if
the Federal Reserve Bank of Boston or the Federal Reserve Bank of New York is
closed on the day the redemption proceeds would ordinarily be wired.
If you have authorized Telephone Redemption via Fund Direct, you can take ad-
vantage of two methods of telephone redemption: regular telephone redemption
and expedited telephone redemption. You may make regular Fund Direct redemption
requests by calling Nuveen at (800) 257-8787. If a regular telephone redemption
request is received prior to 4:00 p.m. Eastern Time, the shares to be redeemed
earn income on the day the request is made, and the redemption is effected on
the following business
S-37
<PAGE>
day. For regular redemption requests received after 4:00 p.m. Eastern Time,
the shares to be redeemed earn income through the following business day, and
the redemption is effected on the second business day following the request.
For all regular redemptions, you will typically receive your funds within
three business days after your redemption is effected. You may make expedited
telephone redemption requests to redeem shares that are worth at least $1,000
by calling Nuveen at (800) 257-8787. If an expedited redemption request is re-
ceived by 12:00 noon Eastern Time, the shares to be redeemed do not earn in-
come on that day, but the redemption is effected, and you will normally re-
ceive your funds, on that day. If an expedited redemption request is received
after 12:00 noon Eastern Time, the shares to be redeemed earn income on the
day the request is received. The redemption is effected, and you will normally
receive your funds, on the next business day following the request. The Fund
reserves the right to charge a fee for expedited redemption requests.
How to Change Authorized Redemption Instructions
In order to establish multiple accounts, or to change the account or accounts
designated to receive redemption proceeds, a written request specifying the
change must be sent to Nuveen. This request must be signed by each account
owner with signatures guaranteed by a member of an approved Medallion Guaran-
tee Program or in such other manner as may be acceptable to the fund. Further
documentation may be required from corporations, executors, trustees or per-
sonal representatives.
The Fund reserves the right to refuse a telephone redemption and, at its op-
tion, may limit the timing, amount or frequency of these redemptions. This
procedure may be modified or terminated at any time, on 30 days' notice, by
the Fund. The Fund, the transfer agent and Nuveen will not be liable for fol-
lowing telephone instructions reasonably believed to be genuine.
Redemption in Kind
The fund has committed to pay in cash all redemption requests made by each
shareholder during any 90 day period up to the lesser of $250,000 or 1% of the
net asset value of the fund at the beginning of such period. This commitment
is irrevocable without the prior approval of the SEC and is a fundamental pol-
icy of the fund which may not be changed without shareholder approval. In the
case of redemption requests in excess of such amounts, the Board of Trustees
reserves the right to have the Fund make payment in whole or in part in secu-
rities or other assets of the fund in case of an emergency or any time a cash
distribution would impair the liquidity of the Fund to the detriment of the
existing shareholders. In this event, the securities would be valued in the
same manner as the portfolio of the fund is valued. If the recipient were to
sell such securities, he or she would incur brokerage charges.
Other Practices
The Fund may suspend the right of redemption or delay payment more than seven
days (a) during any period when the New York Stock Exchange is closed (other
than customary weekend and holiday closings), (b) when trading in the markets
the Fund normally utilizes is restricted, or an emergency exists as determined
by the SEC so that disposal of the Fund's investments or determination of its
net asset value is not reasonably practicable, or (c) for such other periods
as the SEC by order may permit for protection of the shareholders of the Fund.
S-38
<PAGE>
The Fund has authorized certain brokers and firms to accept purchase and re-
demption orders on its behalf. The Fund will consider an order to be "received"
when such a broker or firm accepts the order from its customer.
In addition to the types of compensation to dealers to promote sales of Fund
shares that are described in the prospectus, Nuveen may from time to time make
additional reallowances only to certain authorized dealers who sell or are ex-
pected to sell certain minimum amounts of shares of the Nuveen Mutual Funds
during specified time periods.
SERVICE PLAN
The Fund had adopted a Service Plan Pursuant to Rule 12b-1 under the 1940 Act.
The Plan was adopted by the Board of Trustees, including a majority of direc-
tors who are not interested persons and who have no direct or indirect finan-
cial interest in the Plan, and approved by shareholders.
Under the Plan, the Fund pays an annual fee of .25% of the average daily net
assets of serviced accounts to reimburse Nuveen for compensating authorized
dealers, including Nuveen for providing ongoing services to shareholders. Such
services generally include establishing and maintaining shareholder accounts,
processing purchase and redemption orders, arranging for bank wires and answer-
ing shareholder inquiries. Under the Plan, the Fund pays the entire amount of
the fees. Nuveen may, at its discretion and from its own resources, pay certain
firms additional amounts for services rendered to shareholders.
Under the Plan, the Controller of the Fund will report quarterly to the Board
of Trustees for its review of amounts expended for services rendered under the
Plan. The Plan may be terminated at any time, without the payment of any penal-
ty, by a vote of a majority of the directors who are not "interested persons"
and who have no direct or indirect financial interest in the Plan or by vote of
a majority of the outstanding voting securities of the applicable series of the
Fund. The Plan may be renewed from year to year if approved by a vote of the
Board of Trustees and a vote of the non-interested directors who have no direct
or indirect financial interest in the Plan cast in person at a meeting called
for the purpose of voting on the Plan. The Plan may be continued only if the
directors who vote to approve such continuance conclude, in the exercise of
reasonable business judgment and in light of their fiduciary duties under ap-
plicable law, that there is a reasonable likelihood that the Plan will benefit
such series of the Fund and its shareholders. The Plan is intended to benefit
the fund by promoting the sale of fund shares, which in turn leads to economies
of scale and helps assure the continued viability of the Fund. The Plan may not
be amended to increase materially the cost which the Service Plan series of the
Fund may bear without the approval of the shareholders. Any other material
amendments of the Plans must be approved by the non-interested directors by a
vote cast in person at a meeting called for the purpose of considering such
amendments. During the continuance of the Plan, as required by the Rule, the
selection and nomination of the non-interested directors will be committed to
the discretion of the non-interested directors then in office. Nuveen's compen-
sation under the Plan is not based on Nuveen's expenses incurred in providing
services to shareholders.
For the fiscal year ended February 28, 1999, the Fund, as its predecessor, paid
12b-1 fees in the amount of $23,000.
S-39
<PAGE>
No trustee nor any "interested" person of the Fund has any direct or indirect
financial interest in the Plan or any agreement related to the Plan.
OTHER INFORMATION REGARDING SHARES OF FUND
Shareholders should note that when a Fund dividend check has been returned to
the sender by the post office after repeated mailings, the shareholder account
will thereafter be registered for automatic reinvestment of dividends and thus
the dividend check and future dividend checks will be reinvested in additional
Fund shares. Shareholders are reminded that they need to advise the Fund
promptly in writing of any change in address.
The Glass-Steagall Act and other applicable laws, among other things, may
limit banks from engaging in the business of underwriting, selling or distrib-
uting securities. Since the only functions of banks who may be engaged as
Service Organizations is to perform administrative shareholder servicing func-
tions, Nuveen California Tax-Free Fund, Inc. believes that such laws should
not preclude a bank from acting as a Service Organization. However, future
changes in either federal or state statutes or regulations relating to the
permissible activities of banks and their subsidiaries or affiliates, as well
as judicial or administrative decisions or interpretations of statutes or reg-
ulations, could prevent a bank from continuing to perform all or a part of its
shareholder servicing activities. If a bank were prohibited from so acting,
its shareholder customers would be permitted to remain shareholders of the
Fund and alternative means for continuing the servicing of such shareholders
would be sought.
Nuveen serves as the principal underwriter of the shares of the Fund pursuant
to a "best efforts" arrangement as provided by a distribution agreement with
the Fund, dated January 2, 1990 and last renewed on July 31, 1998 ("Distribu-
tion Agreement"). Pursuant to the Distribution Agreement, the Fund appointed
Nuveen to be its agent for the distribution of the Fund's shares on a continu-
ous offering basis. Nuveen sells shares to or through brokers, dealers, banks
or other qualified financial intermediaries (collectively referred to as
"Dealers"), or others, in a manner consistent with the Fund's then effective
registration statement. Pursuant to the Distribution Agreement, Nuveen, at its
own expense, finances certain activities incident to the sale and distribution
of the Fund's shares, including printing and distributing of prospectuses and
statements of additional information to other than existing shareholders, the
printing and distributing of sales literature, advertising and payment of com-
pensation and giving of concessions to dealers. Expenses incurred in register-
ing the Fund and its shares under federal and state securities laws are paid
by the Fund.
S-40
<PAGE>
Statement of Additional Information
June 10, 1999
Nuveen Money Market Trust
333 West Wacker Drive
Chicago, Illinois 60606
Nuveen Money Market Trust
NUVEEN NEW YORK TAX-EXEMPT MONEY MARKET FUND
This Statement of Additional Information is not a prospectus. This Statement of
Additional Information should be read in conjunction with the Prospectus of the
Nuveen New York Tax-Exempt Money Market Fund dated June 10, 1999. The Prospec-
tus may be obtained without charge from certain securities representatives,
banks, and other financial institutions that have entered into sales agreements
with John Nuveen & Co. Incorporated, or from the Fund by mailing a written re-
quest to the Fund, c/o. John Nuveen & Co. Incorporated ("Nuveen"), 333 West
Wacker Drive, Chicago, Illinois 60606 or by calling (800) 257-8787.
<TABLE>
<S> <C>
Table of Contents Page
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Investment Policies and Investment Portfolio S-2
- ------------------------------------------------------------
Management S-18
- ------------------------------------------------------------
Investment Adviser and Investment Management Agreement S-24
- ------------------------------------------------------------
Portfolio Transactions S-25
- ------------------------------------------------------------
Net Asset Value S-26
- ------------------------------------------------------------
Tax Matters S-28
- ------------------------------------------------------------
Performance Information S-32
- ------------------------------------------------------------
Additional Information About Purchases and Sales S-38
- ------------------------------------------------------------
Service Plan S-41
- ------------------------------------------------------------
Other Information Regarding Shares of the Fund S-42
- ------------------------------------------------------------
</TABLE>
Principal Underwriter Investment Adviser Independent Public
John Nuveen & Co. Incorporated Accountants
Nuveen Advisory Corp.,
Subsidiary of John for the Fund
Nuveen & Co.
Incorporated
Chicago: Arthur Andersen LLP
333 West Wacker Drive 33 West Monroe Street
Chicago, Illinois 60606 333 West Wacker Drive Chicago, Illinois 60603
(312) 917-7700 Chicago, Illinois
60606 Transfer and Dividend
New York: Disbursing Agent
10 East 50th Street Custodian Chase Global Funds
New York, New York 10022 The Chase Manhattan Services Company
(212) 207-2000 Bank P.O. Box 5186
4 New York Plaza New York, NY 10274
New York, New York
10004
<PAGE>
INVESTMENT POLICIES AND INVESTMENT PORTFOLIO
Fundamental Policies
The investment objective and certain fundamental policies of the Fund are de-
scribed in the Prospectus. The Fund, as a fundamental policy, may not, without
the approval of the holders of a majority of the shares of the Fund:
(1) Invest in securities other than Municipal Obligations and temporary in-
vestments, as those terms are defined in the Prospectus, and stand-by commit-
ments with respect to Municipal Obligations purchased by the Fund;
(2) Invest more than 5% of its total assets in securities of any one issuer,
except that this limitation shall not apply to securities of the United States
government, its agencies and instrumentalities or to the investment of 25% of
the Fund's assets;
(3) Borrow money, except from banks for temporary or emergency purposes and
not for investment purposes and then only in an amount not exceeding (a) 10%
of the value of its total assets at the time of borrowing or (b) one-third of
the value of the Fund's total assets including the amount borrowed, in order
to meet redemption requests which might otherwise require the untimely dispo-
sition of securities. While any such borrowings exceed 5% of the Fund's total
assets, no additional purchases of investment securities will be made by the
Fund. If due to market fluctuations or other reasons, the value of the Fund's
assets falls below 300% of its borrowings, the Fund will reduce its borrowings
within 3 business days. To do this, the Fund may have to sell a portion of its
investments at a time when it may be disadvantageous to do so;
(4) Pledge, mortgage or hypothecate its assets, except that, to secure
borrowings permitted by subparagraph (3) above, it may pledge securities hav-
ing a market value at the time of pledge not exceeding 10% of the value of the
Fund's total assets;
(5) Issue senior securities as defined in the Investment Company Act of 1940,
except to the extent such issuance might be involved with respect to
borrowings described under item (3) above;
(6) Underwrite any issue of securities, except to the extent that the purchase
of Municipal Obligations in accordance with its investment objective, policies
and limitations, may be deemed to be an underwriting;
(7) Purchase or sell real estate, but this shall not prevent the Fund from in-
vesting in Municipal Obligations secured by real estate or interests therein
or foreclosing upon and selling such security;
(8) Purchase or sell commodities or commodities contracts or oil, gas or other
mineral exploration or development programs;
(9) Make loans, other than by entering into repurchase agreements and through
the purchase of Municipal Obligations or temporary investments in accordance
with its investment objective, policies and limitations;
(10) Make short sales of securities or purchase any securities on margin, ex-
cept for such short-term credits as are necessary for the clearance of trans-
actions;
(11) Write or purchase put or call options, except to the extent that the pur-
chase of a stand-by commitment may be considered the purchase of a put;
S-2
<PAGE>
(12) Invest more than 25% of its total assets in securities of issuers in any
one industry; provided, however, that such limitations shall not be applicable
to Municipal Obligations issued by governments or political subdivisions of
governments, and obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities;
(13) Invest more than 10% of its assets in repurchase agreements maturing in
more than seven days, "illiquid" securities (such as non-negotiable CDs) and
securities without readily available market quotations.
For the purpose of applying the limitations set forth in paragraph (2) above,
an issuer shall be deemed a separate issuer when its assets and revenues are
separate from other governmental entities and its securities are backed only by
its assets and revenues. Similarly, in the case of a non-governmental issuer,
such as an industrial corporation or a privately owned or operated hospital, if
the security is backed only by the assets and revenues of the non-governmental
user then such non-governmental user would be deemed to be the sole issuer.
Where a security is also backed by the enforceable obligation of a superior or
unrelated governmental entity (other than a bond insurer) it shall be included
in the computation of securities owned that are issued by such superior govern-
mental entity or other entity.
Where a security is guaranteed by a governmental entity or some other facility,
such as a bank guarantee or letter of credit, such a guarantee or letter of
credit would be considered a separate security and would be treated as an issue
of such government, other entity or bank. Where a security is insured by bond
insurance, it shall not be considered a security issued or guaranteed by the
insurer; instead the issuer of such security will be determined in accordance
with the principles set forth above. The foregoing restrictions do not limit
the percentage of the Fund's assets that may be invested in securities insured
by any single insurer. It is a fundamental policy of the Fund, which cannot be
changed without the approval of the holders of a majority of shares of such
Fund, that the Fund will not hold securities of a single bank, including secu-
rities backed by a letter of credit of such bank, if such holdings would exceed
10% of the total assets of the Fund.
The foregoing restrictions and limitations, as well as the Fund's policies as
to ratings of fund investments, will apply only at the time of purchase of se-
curities, and the percentage limitations will not be considered violated unless
an excess or deficiency occurs or exists immediately after and as a result of
an acquisition of securities, unless otherwise indicated.
The foregoing fundamental investment policies, together with the investment ob-
jective of the Fund, cannot be changed without approval by holders of a "major-
ity of the Fund's outstanding voting shares." As defined in the Investment Com-
pany Act of 1940, this means the vote of (i) 67% or more of the Fund's shares
present at a meeting, if the holders of more than 50% of the Fund's shares are
present or represented by proxy, or (ii) more than 50% of the Fund's shares,
whichever is less.
General Information
The Nuveen Money Market Trust (the "Trust") is an open-end management series
investment company organized as a Massachusetts business trust on January 15,
1999. The Fund (formerly, the Nuveen New York Tax-Free Money Market Fund, the
Fund's predecessor, a series of the Nuveen Tax-Free Money Market Fund, Inc.) is
an open-end, diversified management investment company organized
S-3
<PAGE>
as a series of the Trust. The Trust is an open-end management series company
under SEC Rule 18f-2. The Fund is a separate series issuing its own shares. The
Trust currently has five series. Certain matters under the Investment Company
Act of 1940 which must be submitted to a vote of the holders of the outstanding
voting securities of a series company shall not be deemed to have been effec-
tively acted upon unless approved by the holders of a majority of the outstand-
ing voting securities of each series affected by such matter.
The Trust is an entity of the type commonly known as a "Massachusetts business
trust." Under Massachusetts law, shareholders of a trust may, under certain
circumstances, be held personally liable as partners for its obligations. How-
ever, the Declaration of Trust contains an express disclaimer of shareholder
liability for acts or obligations of the Trust and requires that notice of this
disclaimer be given in each agreement, obligation or instrument entered into or
executed by the Trust or the Trustees. The Declaration of Trust further pro-
vides for indemnification out of the assets and property of the Trust for all
loss and expense of any shareholder personally liable for the obligations of
the Trust. Thus, the risk of a shareholder incurring financial loss on account
of shareholder liability is limited to circumstances in which both inadequate
insurance existed and the Trust itself were unable to meet its obligations. The
Trust believes the likelihood of these circumstances is remote.
Fund Shares represent an interest in the same portfolio of investments of the
Fund. Fund Shares have equal rights as to voting, redemption, dividends and
liquidation, and have exclusive voting rights with respect to any applicable
distribution or service plan. There are no conversion, preemptive or other sub-
scription rights. The Board of Trustees of the Fund have the right to establish
additional series and classes of shares in the future, to change those series
or classes and to determine the preferences, voting powers, rights and privi-
leges thereof.
Year 2000 Issues
The "Year 2000" problem refers to the fact that many computer programs use only
the last two digits of a year, and do not recognize a year that begins with
"20" instead of "19." If this problem is not corrected, computers could func-
tion improperly or not at all, which could affect the global economy. The SEC
has urged securities issuers to disclose the steps they are taking to correct
any Year 2000 problems.
The Fund invests primarily in money market instruments. If the issuers of these
instruments do not correct any Year 2000 problems in a timely manner, they
could experience problems in conducting their operations or in making payments
on their securities, which could cause the value of these securities to de-
cline. Issuers could experience three types of Year 2000 problems. First, if an
issuer's internal computer systems experience Year 2000 problems, this could
disrupt an issuer's operations (such as its ability to collect local taxes or
fees). Second, an issuer may rely on other parties for the payments that sup-
port its debt service, such as servicers that collect mortgage or student loan
payment, and those third parties may have Year 2000 problems that interfere
with their ability to forward payments to the issuer. Third, an issuer may have
mechanical problems in sending payments to its securities holders.
Nuveen Advisory is obtaining information about the Year 2000 readiness of the
issuers of its portfolio securities as part of its ongoing surveillance of the
creditworthiness of those issuers.
S-4
<PAGE>
Portfolio Securities
The various securities in which the Fund intends to invest are described in the
Prospectus. The following is a more complete description of certain short-term
Municipal Obligations in which the Fund may invest:
The Fund invests in debt obligations issued by New York State, its cities and
local authorities to obtain funds for various public purposes, including the
construction of such public facilities as airports, bridges, highways, housing,
hospitals, mass transportation, schools, streets and water and sewer works.
Other public purposes for which these securities may be issued include the re-
financing of outstanding obligations, the obtaining of funds for general oper-
ating expenses and for loans to other public institutions and facilities. In
addition, the Fund may invest in certain industrial development bonds and pol-
lution control bonds in which the Fund will primarily invest are issued by New
York State and cities and local authorities in New York or are issued by pos-
sessions of the United States within Section 103(c) of the Internal Revenue
Code (such as Puerto Rico).
Two principal classifications of municipal securities are "general obligation"
and "revenue" bonds. General obligation bonds are secured by the issuer's
pledge of its full faith, credit and taxing power for the payment of principal
and interest. Revenue bonds are payable only from the revenues derived from a
particular facility or class of facilities or, in some cases, from the proceeds
of a special excise or other specific revenue source. Industrial development
and pollution control bonds are in most cases revenue bonds and do not gener-
ally constitute the pledge of the credit or taxing power of the issuer of such
bonds.
Municipal securities can be further classified between bonds and notes. Bonds
are issued to raise longer-term capital but, when purchased by the Fund, will
have 397 days or less remaining until maturity or will have a variable or
floating rate of interest (see below). These issues may be either general obli-
gation bonds or revenue bonds.
Notes are short-term instruments with a maturity of two years or less. Most
notes are general obligations of the issuer and are sold in anticipation of a
bond sale, collection of taxes or receipt of other revenues. Payment of these
notes is primarily dependent upon the issuer's receipt of the anticipated reve-
nues.
Municipal securities also include very short-term unsecured, negotiable promis-
sory notes, issued by states, municipalities, and their agencies which are
known as "tax-exempt commercial paper" or "municipal paper." Payment of princi-
pal and interest on issues of municipal paper may be made from various sources,
to the extent that funds are available therefrom. There is a limited secondary
market for issues of municipal paper.
While these various types of notes as a group represent the major portion of
the tax-exempt note market, other types of notes are occasionally available in
the marketplace, and the Funds may invest in such other types of notes to the
extent consistent with their investment objectives and limitations. Such notes
may be issued for different purposes and with different security than those
mentioned above.
S-5
<PAGE>
The yields on municipal securities are dependent on a variety of factors, in-
cluding the condition of the general money market and the municipal securities
market, the size of a particular offering, the maturity of the obligation and
the rating of the issue. The ratings of Moody's and S&P represent their opin-
ions as to the quality of the municipal securities which they undertake to
rate. It should be emphasized, however, that ratings are general and are not
absolute standards of quality. Consequently, municipal securities with the same
maturity, coupon and rating may have different yields while obligations of the
same maturity and coupon with different ratings may have the same yield. The
market value of outstanding municipal securities will vary with changes in pre-
vailing interest rate levels and as a result of changing evaluations of the
ability of their issuers to meet interest and principal payments.
Obligations of issuers of debt obligations are subject to the provisions of
bankruptcy, insolvency and other laws affecting the rights and remedies of
creditors. In addition, the obligations of such issuers may become subject to
the laws enacted in the future by Congress, state legislatures or referenda ex-
tending the time for payment of principal and/or interest, or imposing other
constraints upon enforcement of such obligations or upon municipalities to levy
taxes. There is also the possibility that, as a result of legislation or other
conditions, the power or ability of any issuer to pay, when due, the principal
of and interest on its obligations may be materially affected.
Bond Anticipation Notes (BANs) are usually general obligations of state and lo-
cal governmental issuers which are sold to obtain interim financing for pro-
jects that will eventually be funded through the sale of long-term debt obliga-
tions or bonds. The ability of an issuer to meet its obligations on its BANs is
primarily dependent on the issuer's access to the long-term municipal bond mar-
ket and the likelihood that the proceeds of such bond sales will be used to pay
the principal and interest on the BANs.
Tax Anticipation Notes (TANs) are issued by state and local governments to fi-
nance the current operations of such governments. Repayment is generally to be
derived from specific future tax revenues. TANs are usually general obligations
of the issuer. A weakness in an issuer's capacity to raise taxes due to, among
other things, a decline in its tax base or a rise in delinquencies could ad-
versely affect the issuer's ability to meet its obligations on outstanding
TANs.
Revenue Anticipation Notes (RANs) are issued by governments or governmental
bodies with the expectation that future revenues from a designated source will
be used to repay the notes. In general, they also constitute general obliga-
tions of the issuer. A decline in the receipt of projected revenues, such as
anticipated revenues from another level of government, could adversely affect
an issuer's ability to meet its obligations on outstanding RANs. In addition,
the possibility that the revenues would, when received, be used to meet other
obligations could affect the ability of the issuer to pay the principal and in-
terest on RANs.
Construction Loan Notes are issued to provide construction financing for spe-
cific projects. Frequently, these notes are redeemed with funds obtained from
the Federal Housing Administration.
S-6
<PAGE>
Bank Notes are notes issued by local governmental bodies and agencies such as
those described above to commercial banks as evidence of borrowings. The pur-
poses for which the notes are issued are varied but they are frequently issued
to meet short-term working-capital or capital-project needs. These notes may
have risks similar to the risks associated with TANs and RANs.
Industrial Development Bonds (IDBs) and Pollution Control Bonds (PCBs) are is-
sued by or on behalf of public authorities to finance various privately-rated
facilities. These bonds are included within the term municipal security if the
interest paid thereon is exempt from federal income tax.
Variable and Floating Rate Instruments. Certain money market instruments may
carry variable or floating rates of interest. Such instruments bear interest
at rates which are not fixed, but which vary with changes in specified market
rates or indices, such as a bank prime rate or a tax-exempt money market in-
dex. Variable rate notes are adjusted to current interest rate levels at cer-
tain specified times, such as every 30 days, as set forth in the instrument. A
floating rate note adjusts automatically whenever there is a change in its
base interest rate adjustor, e.g., a change in the prime lending rate or spec-
ified interest rate indices. Typically such instruments carry demand features
permitting the Funds to recover the full principal amount thereof upon speci-
fied notice.
One form of variable or floating rate instrument consists of an underlying
fixed rate municipal bond that is subject to a third party demand feature or
"tender option." The holder of the bond would pay a "tender fee" to the third
party tender option provider, the amount of which would be periodically ad-
justed so that the bond/tender option combination would reasonably be expected
to have a market value that approximates the par value of the bond. This
bond/tender option combination would therefore be functionally equivalent to
ordinary variable or floating rate obligations as described above, and the
Fund may purchase such obligations subject to certain conditions specified by
the Securities and Exchange Commission.
The Fund's right to obtain payment at par on a demand instrument upon demand
could be adversely affected by events occurring between the date the Fund
elects to tender the instrument and the date the proceeds are due. Nuveen Ad-
visory will monitor on an ongoing basis the pricing, quality and liquidity of
such instruments and will similarly monitor the ability of an obligor under a
demand instrument, including demand obligors as to instruments supported by
bank letters of credit or guarantees, to pay principal and interest on demand.
Although the ultimate maturity of such variable rate obligations may exceed
one year, the Fund will treat the maturity of each variable rate demand obli-
gation, for purposes of computing its dollar-weighted average portfolio matu-
rity, as the longer of (i) the notice period required before the Fund is enti-
tled to payment of the principal amount through demand, or (ii) the period re-
maining until the next interest rate adjustment.
The Fund may also obtain stand-by commitments with respect to Municipal Obli-
gations. Under a stand-by commitment (often referred to as a put), the party
issuing the commitment agrees to purchase at the Fund's option the Municipal
Obligation at an agreed-upon price on certain dates or within a specific peri-
od. Since the value of a stand-by commitment depends in part upon the ability
of the
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issuing party to meet its purchase obligations thereunder, the Fund will enter
into stand-by commitments only with parties which have been evaluated by Nuveen
Advisory and, in the opinion of Nuveen Advisory, present minimal credit risks.
The amount payable to the Fund upon its exercise of a stand-by commitment would
be (1) the acquisition cost of the Municipal Obligations (excluding any accrued
interest that the Fund paid on acquisition), less any amortized market premium
or plus any amortized market or original issue discount during the period the
Fund owned the security, plus (2) all interest accrued on the security since
the last interest payment date during the period the security was owned by the
Fund. The Fund's right to exercise stand-by commitments held by it will be un-
conditional and unqualified. The acquisition of a stand-by commitment will not
affect the valuation of the underlying security, which will continue to be val-
ued in accordance with the amortized cost method. The stand-by commitment it-
self will be valued at zero in determining net asset value. The Fund may pur-
chase stand-by commitments for cash or pay a higher price for portfolio securi-
ties which are acquired subject to such a commitment (thus reducing the yield
to maturity otherwise available for the same securities). The maturity of a Mu-
nicipal Obligation purchased by the Fund will not be considered shortened by
any stand-by commitment to which such security is subject. Although a Fund's
rights under a stand-by commitment would not be transferable, the Fund could
sell Municipal Obligations which were subject to a stand-by commitment to a
third party at any time.
When-Issued Securities
The Fund may purchase and sell securities on a when-issued or delayed delivery
basis. When-issued and delayed delivery transactions arise when securities are
purchased or sold with payment and delivery beyond the regular settlement date
(when-issued transactions normally settle within 15-45 days). On such transac-
tions the payment obligation and the interest rate are fixed at the time the
buyer enters into the commitment. The commitment to purchase securities on a
when-issued or delayed delivery basis may involve an element of risk because
the value of the securities is subject to market fluctuation, no interest ac-
crues to the purchaser prior to settlement of the transaction, and at the time
of delivery the market value may be less than cost. At the time the Fund makes
the commitment to purchase a Municipal Obligation on a when-issued or delayed
delivery basis, it will record the transaction and reflect the amount due and
the value of the security in determining its net asset value. Likewise, at the
time the Fund makes the commitment to sell a Municipal Obligation on a delayed
delivery basis, it will record the transaction and include the proceeds to be
received in determining its net asset value; accordingly, any fluctuations in
the value of the Municipal Obligation sold pursuant to a delayed delivery com-
mitment are ignored in calculating net asset value so long as the commitment
remains in effect. The Fund will also maintain designated readily marketable
assets at least equal in value to commitments to purchase when-issued or de-
layed delivery securities, such assets to be segregated by the Custodian spe-
cifically for the settlement of such commitments. The Fund will only make com-
mitments to purchase Municipal Obligations on a when-issued or delayed delivery
basis with the intention of actually acquiring the securities, but the Fund re-
serves the right to sell these securities before the settlement date if it is
deemed advisable. If a when-issued security is sold before delivery any gain or
loss would not be tax-exempt. The Fund commonly engages in when-issued transac-
tions in order to purchase or sell newly-issued Municipal Obligations, and may
engage in delayed delivery transactions in order to manage its operations more
effectively.
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Special Considerations Relating to New York Securities
Because the Fund invests substantially all of its assets in New York securi-
ties, the Fund is therefore more susceptible to political, economic or regula-
tory factors adversely affecting New York. Set forth below is information that
bears upon the risk of investing in securities issued by public authorities in
New York. This information was obtained from official statements of issuers lo-
cated in the designated states as well as from other publicly available offi-
cial documents and statements. The Fund has not independently verified any of
the information contained in such statements and documents, but the Fund is not
aware of facts which would render such information inaccurate.
There can be no assurance that current or future statewide or regional economic
difficulties, and the resulting impact on State or local government finances
generally, will not adversely affect the market value of New York securities
held by the Fund or the ability of particular obligors to make timely payments
of debt service on (or relating to) those obligations.
(1) The State: The State has historically been one of the wealthiest states in
the nation. For decades, however, the State economy has grown more slowly than
that of the nation as a whole, gradually eroding the State's relative economic
affluence. Statewide, urban centers have experienced significant changes in-
volving migration of the more affluent to the suburbs and an influx of gener-
ally less affluent residents. Regionally, the older Northeast cities have suf-
fered because of the relative success that the South and the West have had in
attracting people and business. The State has for many years had a very high
State and local tax burden relative to other states. The burden of State and
local taxation, in combination with the many other causes of regional economic
dislocation, has contributed to the decisions of some businesses and individu-
als to relocate outside, or not locate within, the State.
Slowdown of Regional Economy. A national recession commenced in mid-1990. The
downturn continued throughout the State's 1990-91 fiscal year and was followed
by a period of weak economic growth during the 1991 and 1992 calendar years.
For calendar year 1993, the economy grew faster than in 1992, but still at a
very moderate rate as compared to other recoveries. Moderate economic growth
continued in calendar year 1994. Economic growth slowed within New York during
1995 and 1996. Personal income and employment growth in the State improved in
1997, although at lower levels than in the national economy. The State has
forecasted continued moderate growth in 1998 and 1999, although growth rates
are expected to lessen gradually during the course of the two years. The
State's economic growth continues to lag behind the nation's, due in part to
restructuring in the healthcare, social service and banking sectors and contin-
ued spending restraint in government. Many uncertainties exist in forecasts of
both the national and State economies and there can be no assurance that the
State's economy will perform at a level sufficient to meet the State's projec-
tions of receipts and disbursements.
1999-2000 Fiscal Year. The Governor issued a proposed Executive Budget for the
1999-2000 fiscal year (the "Proposed Budget") on January 20, 1999, which pro-
jected a balanced general fund and receipts and disbursements of $36.22 billion
and $36.18 billion, respectively. As of May 11, 1999, the State legislature had
not yet enacted, nor had the Governor and the legislature reached an agreement
on, the budget for the 1999-2000 fiscal year, which commenced on April 1, 1999.
The Governor and the State's legislature have agreed on or proposed a series of
short-term stopgap spending measures
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<PAGE>
to fund state payrolls and advances to certain municipalities and certain state
programs. The delay in the enactment of the budget may negatively affect cer-
tain proposed actions and reduce projected savings.
As compared to the 1998-99 Financial Plan, the governor's budget proposes year-
to-year in general fund spending of 2.89 percent. Current law and programmatic
requirements are primarily responsible for the year-to-year growth in general
fund spending. New spending is partially offset by reductions in capital pro-
jects transfers due to the financing of a certain program from resources avail-
able in 1998-99, welfare assistance savings, lower spending in certain areas
and lower transfers.
The Proposed Budget and the 1999-2000 Financial Plan may be impacted negatively
by uncertainties relating to the economy and tax collections. In particular,
should the national economy grow more slowly than forecasted by the State, rev-
enues received by the State would be adversely affected. In addition, proposed
retroactive changes to the federal tax treatment of capital gains would flow
through to the State and could significantly reduce tax receipts.
1998-99 Fiscal Year. The State is projecting that it will end the 1998-99 fis-
cal year with a $1.8 billion cash surplus. Almost all of the surplus was de-
rived from higher-than-expected tax receipts, reflecting continued growth in
the State's economy and another strong year in the financial markets.
Future Fiscal Years. There can be no assurance that the State will not face
substantial potential budget gaps in the future resulting from a significant
disparity between tax revenues projected from a lower recurring receipts base
and the spending required to maintain State programs at current levels. To ad-
dress any potential budgetary imbalance, the State may need to take significant
actions to align recurring receipts and disbursements. The Governor's budget
for fiscal year 1999-2000 projects that the State will end 1998-99 with a clos-
ing balance in the general fund of $500 million and faces budget gaps of $1.5
billion and $3.75 billion that may need to be closed for fiscal years 2000-01
and 2001-02, respectively.
Indebtedness. As of March 31, 1999, the total amount of State general obliga-
tion debt stood at $4.7 billion.
The Governor's budget for fiscal year 1999-2000 projects approximately $2.5
billion of borrowings by the state for capital purposes. The projections of the
State regarding its borrowings for any fiscal year are subject to change if ac-
tual receipts fall short of State projections or if other circumstances re-
quire.
In June 1990, legislation was enacted creating the New York Local Government
Assistance Corporation ("LGAC"), a public benefit corporation empowered to is-
sue long-term obligations to fund certain payments to local governments tradi-
tionally funded through the State's annual seasonal borrowing. The Corporation
is authorized to issue up to $4.7 billion in bonds plus amounts necessary to
fund a capital reserve, costs of issuance and, in certain cases, capitalized
interest. As of March 31, 1996, LGAC had issued all of its authorization. Any
issuance of bonds by the Corporation in the future will be for refunding pur-
poses only.
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Financing of capital programs by other public authorities of the State is also
obtained from lease-purchase and contractual-obligation financing arrangements
(nonvoter approved), the debt service for which is paid from State appropria-
tions. As of March 31, 1997, there were $20.8 billion of such other financing
arrangements outstanding and additional financings of this nature by public au-
thorities including LGAC. In addition, certain agencies had issued and have
outstanding approximately $3.3 billion of "moral obligation financings" as of
March 31, 1997, which are to be repaid from project revenues. There has never
been a default on moral obligation debt of the State.
Ratings. In connection with the March 1999 State issuance of general obligation
bonds, Moody's rating of the State's general obligation bonds stood at A2 and
S&P's rating stood at A. On August 28, 1997, S&P upgraded its rating on the
State's general obligation bonds form A- to A.
Previously, Moody's lowered its rating to A on June 6, 1990, its rating having
been A1 since May 27, 1986. S&P lowered its rating from A to A- on January 13,
1992. S&P's previous ratings were A from March 1990 to January 1992, AA- from
August 1987 to March 1990 and A+ from November 1982 to August 1987.
(2) The City and the Municipal Assistance Corporation ("MAC"): The City ac-
counts for approximately 40% of the State's population and personal income, and
the City's financial health affects the State in numerous ways.
In response to the City's fiscal crisis in 1975, the State took a number of
steps to assist the City in returning to fiscal stability. Among other actions,
the State Legislature (i) created MAC to assist with long-term financing for
the City's short-term debt and other cash requirements and (ii) created the
State Financial Control Board (the "Control Board") to review and approve the
City's budgets and four-year financial plans (the financial plans also apply to
certain City-related public agencies).
Economic activity in the City has experienced periods of growth and recession
and can be expected to experience periods of growth and recession in the fu-
ture. Changes in the economic activity in the City, particularly employment,
per capita personal income and retail sales, may have an impact on the City.
Overall, the City's economic improvement accelerated significantly in fiscal
year 1997. Much of the increase can be traced to the performance of the securi-
ties industry, but the City's economy also produced gains in the retail trade
sector, the hotel and tourism industry, and business services, with private
sector employment higher than previously forecasted. The City's current Finan-
cial Plan assumes that, after strong growth in 1997-1998, moderate economic
growth will exist through calendar year 2002, with moderating job growth and
wage increases. However, there can be no assurance that the economic projec-
tions assumed in the Financial Plan will occur or that the tax revenues pro-
jected in the Financial Plan to be received in the amounts anticipated.
Fiscal Year 2000 and the 1998-2002 Financial Plan. On January 29, 1999, the
Mayor released his preliminary billion budget for fiscal year 2000.
The Mayor announced on April 24, 1999 that the preliminary budget for the 1999
fiscal year will be modified to utilize the incurred surplus from the 1999 fis-
cal year to reduce sales taxes, increase spending on certain programs and to
repay a portion of the City's debt.
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<PAGE>
On April 24, 1999, the Mayor also announced revisions to the proposed 1998-
2002 Financial Plan (the "Plan"), which now projects budget gaps of $1.5 bil-
lion, $2.1 billion and $1.6 billion for fiscal years 2000, 2001 and 2002, re-
spectively. The City Comptroller and State Comptroller have each stated that
the fiscal year 1999 budget includes moderate revenue risks. The State Comp-
troller has projected budget gaps for fiscal years 2000, 2001 and 2002 that
are each in excess of the City's estimate.
An extended delay by the State in adopting its 1999-2000 fiscal year budget or
the failure of the State legislature to extend the income tax surcharge would
negatively impact upon the City's financial condition and ability to close
budget gaps for fiscal years 2000 and thereafter.
Given the foregoing, there can be no assurance that the City will continue to
maintain a balanced budget during fiscal year 2000 or thereafter, or that it
can maintain a balanced budget without additional tax or other revenue in-
creases or reductions in City services, which could adversely affect the
City's economic base.
Pursuant to State law, the City prepares a four-year annual financial plan,
which is reviewed and revised on a quarterly basis and which includes the
City's capital, revenue and expense projections. The City is required to sub-
mit its financial plans to review bodies, including the Control Board. If
the City were to experience certain adverse financial circumstances, including
the occurrence or the substantial likelihood and the imminence of the occur-
rence of an annual operating deficit of more than $100 million or the loss of
access to the public credit markets to satisfy the City's capital and seasonal
financial requirements, the Control Board would be required by State law to
exercise certain powers, including prior approval of City financial plans,
proposed borrowings and certain contracts.
The City depends on the State for State aid both to enable the City to balance
its budget and to meet its cash requirements. If the State experiences revenue
shortfalls or spending increases beyond its projections during its 1999-2000
fiscal year or subsequent years, such developments could result in reductions
in projected State aid to the City. In addition, there can be no assurance
that State budgets for the 1999-2000 or future fiscal years will be adopted by
the April 1 statutory deadline and that there will not be adverse effects on
the City's cash flow and additional City expenditures as a result of such de-
lays.
The City projections set forth in the Plan are based on various assumptions
and contingencies which are uncertain and which may not materialize. Changes
in major assumptions could significantly affect the City's ability to balance
its budget as required by State law and to meet its annual cash flow and fi-
nancing requirements. Such assumptions and contingencies include the timing of
any regional and local economic recovery, the absence of wage increases in ex-
cess of the increases assumed in its financial plan, employment growth, provi-
sion of State and Federal aid and mandate relief, State legislative approval
of future State budgets, levels of education expenditures as may be required
by State law, adoption of future City budgets by the New York City Council,
approval by the Governor or the State Legislature and the cooperation of MAC
with respect to various other actions proposed in the Plan and changes in fed-
eral tax law.
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The City's ability to maintain a balanced operating budget is dependent on
whether it can identify additional expenditure reductions and action by the
State legislature to achieve balanced operating budgets for fiscal year 2000
and thereafter. Any such proposed expenditure reductions will be difficult to
implement because of their size and the substantial expenditure reductions al-
ready imposed on City operations in recent years.
Attaining a balanced budget is also dependent upon the City's ability to market
its securities successfully in the public credit markets. The City's four-year
capital plan contemplates capital spending of $25.5 billion through the 2003
fiscal year, which will be financed through issuance of general obligation
bonds, Transitional Finance Authority Bonds, Water Authority Revenue Bonds and
Covered Organization obligations, and will be used primarily to reconstruct and
rehabilitate the City's infrastructure and physical assets and to make capital
investments. A significant portion of such bond financing is used to reimburse
the City's general fund for capital expenditures already incurred. In addition,
the City issues revenue and tax anticipation notes to finance its seasonal
working capital requirements. The terms and success of projected public sales
of City general obligation bonds and notes will be subject to prevailing market
conditions at the time of the sale, and no assurance can be given that the
credit markets will absorb the projected amounts of public bond and note sales.
In addition, future developments concerning the City and public discussion of
such developments, the City's future financial needs and other issues may af-
fect the market for outstanding City general obligation bonds and notes. If the
City were unable to sell its general obligation bonds and notes, it would be
prevented from meeting its planned operating and capital expenditures.
On March 5, 1997, New York Governor George Pataki signed legislation creating
The New York City Transitional Finance Authority, which beginning in fiscal
year 1998 is authorized to issue up to $7.5 billion in bonds for capital spend-
ing by the City. Absent creation of this authority, the City would have faced
limitations on its borrowing capacity after 1998 under the State's Constitu-
tion. As of May 11, 1999, the Authority had issued $2.15 billion in bonds. The
bonds are secured by a primary lien on the City's personal income tax receipts
as well as a secondary lien on sales tax receipts.
The City is a defendant in a significant number of lawsuits and is subject to
numerous claims and investigations, including, but not limited to, actions com-
menced and claims asserted against the City arising out of alleged constitu-
tional violations, torts, breaches of contracts, and other violations of law
and condemnation proceedings. While the ultimate outcome and fiscal impact, if
any, on the proceedings and claims are not currently predictable, adverse de-
terminations in certain of them might have a material adverse effect upon the
City's ability to carry out its financial plan. As of June 30, 1997, the City
estimated its potential future liability on outstanding claims to be $3.5
billion.
In April 1996, certain unions, elected officials and others filed an action in
the Supreme Court of the State of New York, County of New York, against the
Mayor which asserted that the City failed to subsidize HHC at the minimum fund-
ing levels required for the 1994 through 1997 fiscal years. On July 15, 1997,
the Court permitted the plaintiffs to amend the complaint and seek an order re-
quiring the City to pay to HHC at least $949 million, $931 million and $831
million for the 1994, 1995 and 1996 fiscal years, respectively, and an amount
to be determined by the Court for the 1997 fiscal year. The Court denied plain-
tiff's motion to preliminarily enjoin the defendant from further reducing the
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<PAGE>
City's subsidy to HHC for the 1996 and 1997 fiscal years from the amount origi-
nally budgeted for the 1996 fiscal year.
Fiscal Year 1999. New York City adopted its 1999 fiscal year budget in June
1998, which provided for spending of $33.4 billion. Due to increased tax reve-
nues resulting from increased profits on Wall Street and tourism, the City ex-
pects to end fiscal year 1999 with a surplus of $2.0 billion.
Fiscal Years 1991 through 1998. The City achieved balanced operating results in
accordance with generally accepted accounting principles for fiscal years 1991
through 1998. The City was required to close substantial budget gaps in these
fiscal years in order to maintain balanced operating results.
Ratings. As of May 11, 1999, Moody's S&P, and Fitch rate the City's outstanding
general obligation bonds A3, BBB+, and A-, respectively. On February 3, 1998,
S&P placed its BBB+ rating of City bonds on Creditwatch with positive implica-
tions. Moody's rating of City bonds was revised in February 1998 to A3 from Ba-
al.
As of December 31, 1998, the City MAC and TFA had, respectively, $26.6 billion
and $3.6 billion and $2.15 billion of outstanding net long-term and short-term
indebtedness.
(3) The State Agencies: Certain Agencies of the State have faced substantial
financial difficulties which could adversely affect the ability of such Agen-
cies to make payments of interest on, and principal amounts of, their respec-
tive bonds. The difficulties have in certain instances caused the State (under
so-called "moral obligation" provisions, which are non-binding statutory provi-
sions for State appropriations to maintain various debt service reserve funds)
to appropriate funds on behalf of the Agencies. Moreover, it is expected that
the problems faced by these Agencies will continue and will require increasing
amounts of State assistance in future years. Failure of the State to appropri-
ate necessary amounts or to take other action to permit those Agencies having
financial difficulties to meet their obligations could result in a default by
one or more of the Agencies. Such default, if it were to occur, would be likely
to have a significant adverse affect on investor confidence in, and therefore
the market price of, obligations of the defaulting Agencies. In addition, any
default in payment on any general obligation of any Agency whose bonds contain
a moral obligation provision could constitute a failure of certain conditions
that must be satisfied in connection with Federal guarantees of City and MAC
obligations and could thus jeopardize the City's long-term financing plans.
As of March 31, 1999, the State reported that its public benefit corporations
had an aggregate of $36.9 billion of outstanding debt, some of which was State-
supported and State-related debt.
(4) State Litigation: The State is a defendant in numerous legal proceedings
pertaining to matters incidental to the performance of routine governmental op-
erations. Such litigation includes, but is not limited to, claims asserted
against the State arising from alleged torts, alleged breaches of contracts,
condemnation proceedings and other alleged violations of State and Federal
laws. Included in the State's outstanding litigation are a number of cases
challenging the constitutionality or the adequacy and effectiveness of a vari-
ety of significant social welfare programs primarily involving the State's men-
tal hygiene programs. Adverse judgments in these matters generally could result
in injunctive
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relief coupled with prospective changes in patient care which could require
substantial increased financing of the litigated programs in the future.
The State is also engaged in a variety of claims wherein significant monetary
damages are sought. Actions commenced by several Indian nations claim that
significant amounts of land were unconstitutionally taken from the Indians in
violation of various treaties and agreements during the eighteenth and nine-
teenth centuries. The claimants seek recovery of approximately six million
acres of land, as well as compensatory and punitive damages.
(5) Other Municipalities: Certain localities in addition to New York City
could have financial problems leading to requests for additional State assis-
tance. The potential impact on the State of such actions by localities is not
included in projections of State receipts and expenditures in the State's
1999-2000 fiscal year.
Fiscal difficulties experienced by the City of Yonkers ("Yonkers") resulted in
the creation of the Financial Control Board for the City of Yonkers (the "Yon-
kers Board") by the State in 1984. The Yonkers Board is charged with oversight
of the fiscal affairs of Yonkers. Future actions taken by the Governor or the
State Legislature to assist Yonkers could result in allocation of State re-
sources in amounts that cannot yet be determined.
Municipalities and school districts have engaged in substantial short-term and
long-term borrowings. State law requires the Comptroller to review and make
recommendations concerning the budgets of those local government units other
than New York City authorized by State law to issue debt to finance deficits
during the period that such deficit financing is outstanding. In December
1995, in reaction to continuing financial problems, the Troy Municipal Assis-
tance Corp., which was created in 1995, imposed a 1996 budget plan upon Troy,
New York. Such revenue bonds have not to date been refinanced. A similar mu-
nicipal assistance corporation has also been established for Newburgh. In ad-
dition, several other New York cities, including Utica, Rome, Schenectady,
Syracuse and Niagara Falls have faced continuing budget deficits, as federal
and state aid and local tax revenues have declined while government expenses
have increased. The financial problems being experienced by the State's
smaller urban centers place additional strains upon the State's financial con-
dition.
Certain proposed Federal expenditure reductions could reduce, or in some cases
eliminate, Federal funding of some local programs and accordingly might impose
substantial increased expenditure requirements on affected localities to in-
crease local revenues to sustain those expenditures. Federal welfare reform
legislation may increase the local burden for welfare benefits. In addition,
proposed changes in the treatment of capital gains for federal income tax pur-
poses could reduce the receipts of the State and City. If the State, New York
City or any of the Agencies were to suffer serious financial difficulties
jeopardizing their respective access to the public credit markets, the market-
ability of notes and bonds issued by localities within the State, including
notes or bonds in the Fund, could be adversely affected. Localities also face
anticipated and potential problems resulting from certain pending litigation,
judicial decisions, and long-range economic trends. The longer-range potential
problems of declining urban population, increasing expenditures, and other
economic trends could adversely affect certain localities and require increas-
ing State assistance in the future.
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(6) Other Issuers of New York Municipal Obligations. There are a number of
other state agencies, instrumentalities and political subdivisions of the State
that issue Municipal Obligations, some of which may be conduit revenue obliga-
tions payable from payments from private borrowers. These entities are subject
to various economic risks and uncertainties, and the credit quality of the se-
curities issued by them may vary considerably from the credit quality of obli-
gations backed by the full faith and credit of the State.
Taxable Investments
Taxable investments (sometimes called "Temporary Investments") include obliga-
tions of the United States Government, its agencies or instrumentalities; debt
securities of issuers having, at the time of purchase, a quality rating within
the two highest grades by either Moody's Investors Service, Inc. ("Moody's") or
Standard and Poor's Corporation ("S&P") (Aaa or Aa, or AAA or AA, respective-
ly); commercial paper rated in the highest grade by either of such rating serv-
ices (Prime-1 or A-1, respectively); certificates of deposit of domestic banks
with assets of $1 billion or more; and municipal securities and U.S. Government
obligations subject to short-term repurchase agreements.
Subject to the limitations described in the prospectus, the Funds may invest in
the following taxable investments:
U.S. Government Direct Obligations--issued by the United States Treasury and
include bills, notes and bonds.
--Treasury bills are issued with maturities of up to one year. They are is-
sued in bearer form, are sold on a discount basis and are payable at par
value at maturity.
--Treasury notes are longer-term interest-bearing obligations with original
maturities of one to seven years.
--Treasury bonds are longer-term interest-bearing obligations with original
maturities from five to thirty years.
U.S. Government Agencies Securities--Certain federal agencies have been estab-
lished as instrumentalities of the United States Government to supervise and
finance certain types of activities. These agencies include, but are not lim-
ited to, the Bank for Cooperatives, Federal Land Banks, Federal Intermediate
Credit Banks, Federal Home Loan Banks, Federal National Mortgage Association,
Government National Mortgage Association, Export-Import Bank of the United
States and Tennessee Valley Authority. Issues of these agencies, while not di-
rect obligations of the United States Government, are either backed by the full
faith and credit of the United States or are guaranteed by the Treasury or sup-
ported by the issuing agencies' right to borrow from the Treasury. There can be
no assurance that the United States Government itself will pay interest and
principal on securities as to which it is not so legally obligated.
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Certificates of Deposit (CDs)--A certificate of deposit is a negotiable inter-
est-bearing instrument with a specific maturity. CDs are issued by banks in ex-
change for the deposit of funds and normally can be traded in the secondary
market, prior to maturity. The Funds will only invest in U.S. dollar denomi-
nated CDs issued by U.S. banks with assets of $1 billion or more.
Commercial Paper--Commercial paper is the term used to designate unsecured
short-term promissory notes issued by corporations. Maturities on these issues
vary from a few to 397 days. Commercial paper may be purchased from U.S. corpo-
rations.
Other Corporate Obligations--The Funds may purchase notes, bonds and debentures
issued by corporations if at the time of purchase there is less than 397 days
remaining until maturity or if they carry a variable or floating rate of inter-
est.
Repurchase Agreements--A repurchase agreement is a contractual agreement
whereby the seller of securities agrees to repurchase the same security at a
specified price on a future date agreed upon by the parties. The agreed upon
repurchase price determines the yield during the Fund's holding period. Repur-
chase agreements are considered to be loans collateralized by the underlying
security that is the subject of the repurchase contract. The Funds will only
enter into repurchase agreements with dealers, domestic banks or recognized fi-
nancial institutions that in the opinion of Nuveen Advisory present minimal
credit risk. The risk to the Funds is limited to the ability of the issuer to
pay the agreed-upon repurchase price on the delivery date; however, although
the value of the underlying collateral at the time the transaction is entered
into always equals or exceeds the agreed-upon repurchase price, if the value of
the collateral declines there is a risk of loss of both principal and interest.
In the event of default, the collateral may be sold but the Funds might incur a
loss if the value of the collateral declines, and might incur disposition costs
or experience delays in connection with liquidating the collateral. In addi-
tion, if bankruptcy proceedings are commenced with respect to the seller of the
security, realization upon the collateral by the Funds may be delayed or limit-
ed. Nuveen Advisory will monitor the value of the collateral at the time the
transaction is entered into and at all times subsequent during the term of the
repurchase agreement in an effort to determine that the value always equals or
exceeds the agreed-upon repurchase price. In the event the value of the collat-
eral declines below the repurchase price, Nuveen Advisory will demand addi-
tional collateral from the issuer to increase the value of the collateral to at
least that of the repurchase price.
Ratings of Investments
The two highest ratings of Moody's for municipal securities are Aaa and Aa. Mu-
nicipal securities rated Aaa are judged to be of the "best quality." The rating
of Aa is assigned to municipal securities which are of "high quality by all
standards," but as to which margins of protection or other elements make long-
term risks appear somewhat larger than in Aaa rated municipal securities. The
Aaa and Aa rated municipal securities comprise what are generally known as
"high grade bonds." Moody's bond rating symbols may contain numerical modifiers
of a generic rating classification. The modifier 1 indicates that the bond
ranks at the high end of its category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates that the issue ranks in the lower end of
its generic rating category.
S-17
<PAGE>
The two highest ratings of S&P for municipal securities are AAA and AA. Munici-
pal securities rated AAA have an extremely strong capacity to pay principal and
interest. The rating of AA indicates that capacity to pay principal and inter-
est is very strong and such bonds differ from AAA issues only in small degree.
The two highest ratings of Moody's and S&P for federally tax-exempt short-term
loans and notes are MIG-1 and MIG-2, or VMIG-1 and VMIG-2 in the case of vari-
able instruments, and SP-1 and SP-2, respectively. Obligations designated MIG-1
or VMIG-1 are the best quality enjoying strong protection from established cash
flows of funds for their servicing or from established and broad-based access
to the market for refinancing, or both. Obligations designated as MIG-2 or
VMIG-2 are high quality obligations with ample margins of protection. The des-
ignation SP-1 indicates a very strong or strong capacity to pay principal and
interest while the designation SP-2 denotes a satisfactory capacity to pay
principal and interest.
The Fund's ability to purchase commercial paper of tax-exempt and corporate is-
suers is limited to commercial paper rated highly by nationally recognized sta-
tistical rating organizations. Issuers rated in the highest category generally
have a superior capacity for repayment of short-term obligations normally evi-
denced by the following characteristics: leading market positions in well-es-
tablished industries; high rates of return on funds employed; conservative cap-
italization structures with moderate reliance on debt and ample asset protec-
tion; broad margins in earnings coverage of fixed financial charges and high
internal cash generation; well-established access to a range of financial mar-
kets and assured sources of alternative liquidity. Issuers rated in the second
highest category have a strong capacity for repayment of short-term promissory
obligations.
Subsequent to its purchase by the Fund, an issue may cease to be rated or its
rating may be reduced below the minimum required for purchase by the Fund. Nei-
ther event requires the elimination of such obligations from the Fund, but
Nuveen Advisory will consider such an event in its determination of whether the
Fund should continue to hold such obligation.
S-18
<PAGE>
MANAGEMENT
The management of the Trust, including general supervision of the duties per-
formed by Nuveen Advisory under the Investment Management Agreement, is the re-
sponsibility of its Board of Trustees. There are seven trustees of the Trust,
one of whom is an "interested person" (as that term is defined in the Invest-
ment Company Act of 1940). None of the trustees who are not "interested per-
sons" of the Fund has ever been a director or employee of, or consultant to,
Nuveen or its affiliates. The names and business addresses of the trustees and
officers of the Trust and their ages and principal occupations and other affil-
iations during the past five years are set forth below.
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
Positions and Principal Occupations
Name and Address Age Offices with Funds During Past Five Years
- -------------------------------------------------------------------------------
<C> <C> <C> <S>
Timothy R. Schwertfeger*+ 50 Chairman and Trustee Chairman of the Board of
333 West Wacker Drive the Funds (since July
Chicago, IL 60606 1996); Trustee and
President of the Funds
advised by Nuveen
Institutional Advisory
Corp. (since July 1996);
Chairman (since July
1996), Director, and
previously Executive
Vice President, of The
John Nuveen Company,
John Nuveen & Co.,
Nuveen Advisory Corp.
and Nuveen Institutional
Advisory Corp; Director
(since 1998) of
Institutional Capital
Corporation; Chairman
and Diector of Nuveen
Asset Management Inc.;
Chairman and Director of
Rittenhouse Financial
Services Inc. (since
1999).
- -------------------------------------------------------------------------------
Robert P. Bremner 58 Trustee Private Investor and
3725 Huntington Street, N.W. Management Consultant.
Washington, D.C. 20015
- -------------------------------------------------------------------------------
Lawrence H. Brown 64 Trustee Retired (August 1989) as
201 Michigan Avenue Senior Vice President of
Highwood, IL 60040 The Northern Trust
Company (banking and
trust industry).
- -------------------------------------------------------------------------------
Anne E. Impellizzeri 66 Trustee Executive Director
3 West 29th Street (since 1998) of Manitoga
New York, NY 10001 (Center for Russell
Wright's design/home and
landscape); formerly
President and Chief
Executive Officer of
Blanton-Peale,
Institutes of Religion
and Health (a training
and counseling
organization).
- -------------------------------------------------------------------------------
Peter R. Sawers 66 Trustee Adjunct Professor of
22 The Landmark Business and Economics,
Northfield, IL 60093 University of Dubuque,
Iowa; Adjunct Professor,
Lake Forest Graduate
School of Management,
Lake Forest, Illinois;
Chartered Financial
Analyst; Certified
Management Consultant.
</TABLE>
- --------------------------------------------------------------------------------
S-19
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------
<CAPTION>
Positions and Principal Occupations
Name and Address Age Offices with Funds During Past Five Years
- ------------------------------------------------------------------------------------------
<C> <C> <C> <S>
William J. Schneider 54 Trustee Senior Partner and Chief
4000 Miller-Valentine Ct. Operating Officer,
P.O. Box 744 Miller-Valentine
Dayton, OH 45401 Partners, Vice
President, Miller-
Valentine Group
(commercial real
estate); Member
Community Advisory
Board, National City
Bank, Dayton, Ohio.
- ------------------------------------------------------------------------------------------
Judith M. Stockdale 51 Trustee Executive Director,
35 E. Wacker Drive Gaylord and Dorothy
Suite 2600 Donnelley Foundation, a
Chicago, IL 60601 private family
foundation (since 1994);
prior thereto, Executive
Director, Great Lakes
Protection Fund (from
1990 to 1994).
- --------------------------------------------------------------------------------
Alan G. Berkshire+ 38 Vice President and Asst. Secretary Vice President and
333 West Wacker Drive since 1998 General Counsel (since
Chicago, IL 60606 September 1997) and
Secretary (since May
1998) of The John Nuveen
Company, John Nuveen &
Co. Incorporated, Nuveen
Advisory Corp. and
Nuveen Institutional
Advisory Corp.; prior
thereto, partner in the
law firm of Kirkland &
Ellis.
- --------------------------------------------------------------------------------
Peter H. D'Arrigo 31 Vice President and Treasurer Vice President of John
333 West Wacker Drive since 1999 Nuveen & Co.
Chicago, IL 60606 Incorporated (since
January 1999), prior
thereto. Assistant Vice
President (from January
1997); formerly,
Associate of John Nuveen
& Co. Incorporated;
Chartered Financial
Analyst.
- --------------------------------------------------------------------------------
Michael S. Davern+ 41 Vice President since 1997 Vice President of Nuveen
333 West Wacker Drive Advisory Corp. (since
Chicago, IL 60606 January 1997); prior
thereto, Vice President
and Portfolio Manager of
Flagship Financial, Inc.
(from September 1991 to
January 1997).
- ------------------------------------------------------------------------------------------
Lorna C. Ferguson+ 53 Vice President since 1998 Vice President of John
333 West Wacker Drive Nuveen & Co.
Chicago, IL 60606 Incorporated; Vice
President of Nuveen
Advisory Corp. and
Nuveen Institutional
Advisory Corp. (since
January 1998).
- ------------------------------------------------------------------------------------------
William M. Fitzgerald+ 35 Vice President since 1996 Vice President of Nuveen
333 West Wacker Drive Advisory Corp. (since
Chicago, IL 60606 December 1995); prior
thereto, Assistant Vice
President of
Nuveen Advisory Corp.
(from September 1992 to
December 1995);
Chartered Financial
Analyst.
- ------------------------------------------------------------------------------------------
Stephen D. Foy+ 44 Vice President and Controller Vice President of John
333 West Wacker Drive since 1998 Nuveen & Co.
Chicago, IL 60606 Incorporated and (since
May 1998) The John
Nuveen Company;
Certified Public
Accountant.
- --------------------------------------------------------------------------------
J. Thomas Futrell+ 43 Vice President since 1991 Vice President of Nuveen
333 West Wacker Drive Advisory Corp.;
Chicago, IL 60606 Chartered Financial
Analyst.
- ------------------------------------------------------------------------------------------
Richard A. Huber+ 36 Vice President since 1997 Vice President of Nuveen
333 West Wacker Drive Institutional Advisory
Chicago, IL 60606 Corp. (since March 1998)
and Nuveen Advisory
Corp. (since January
1997); prior thereto,
Vice President and
Portfolio Manager of
Flagship Financial, Inc.
</TABLE>
- --------------------------------------------------------------------------------
S-20
<PAGE>
<TABLE>
- -----------------------------------------------------------------------------------
<CAPTION>
Positions and Principal Occupations
Name and Address Age Offices with Funds During Past Five Years
- -----------------------------------------------------------------------------------
<C> <C> <C> <S>
Steven J. Krupa+ 41 Vice President since 1990 Vice President of Nuveen
333 West Wacker Drive Advisory Corp.
Chicago, IL 60606
- -----------------------------------------------------------------------------------
Larry W. Martin+ 47 Vice President and Asst. Vice President,
333 West Wacker Drive Secretary since 1993 Assistant Secretary and
Chicago, IL 60606 Assistant General
Counsel of John Nuveen &
Co. Incorporated; Vice
President and Assistant
Secretary of Nuveen
Advisory Corp. and
Nuveen Institutional
Advisory Corp.,
Assistant Secretary of
The John Nuveen Company
and (since January 1997)
Nuveen Asset Management
Inc.
- -----------------------------------------------------------------------------------
Edward F. Neild, IV+ 33 Vice President since 1996 Vice President of Nuveen
333 West Wacker Drive Advisory Corp. and
Chicago, IL 60606 Nuveen Institutional
Advisory Corp. (since
September 1996); prior
thereto, Assistant Vice
President of Nuveen
Advisory Corp. (from
December 1993 to
September 1996) and
Nuveen Institutional
Advisory Corp. (from May
1995 to September 1996);
Chartered Financial
Analyst.
- -----------------------------------------------------------------------------------
Stephen S. Peterson+ 41 Vice President since 1997 Vice President, (since
333 West Wacker Drive September 1997),
Chicago, IL 60606 Assistant Vice President
(from September 1996 to
September 1997), and
Portfolio Manager prior
thereto, of Nuveen
Advisory Corp.;
Chartered Financial
Analyst.
- -----------------------------------------------------------------------------------
Stuart W. Rogers+ 43 Vice President since 1997 Vice President of John
333 West Wacker Drive Nuveen & Co.
Chicago, IL 60606 Incorporated.
- -----------------------------------------------------------------------------------
Thomas C. Spalding Jr.+ 47 Vice President since 1980 Vice President of Nuveen
333 West Wacker Drive Advisory Corp. and
Chicago, IL 60606 Nuveen Institutional
Advisory Corp.;
Chartered Financial
Analyst.
- -----------------------------------------------------------------------------------
William S. Swanson+ 33 Vice President since 1998 Vice President of John
333 West Wacker Drive Nuveen & Co.
Chicago, IL 60606 Incorporated (since
October 1997); Assistant
Vice President (from
September 1996 to
October 1997) and,
formerly, Associate;
Chartered Financial
Analyst.
- -----------------------------------------------------------------------------------
Gifford R. Zimmerman+ 42 Vice President since 1993 and Vice President,
333 West Wacker Drive Secretary since 1998 Assistant Secretary and
Chicago, IL 60606 Associate General
Counsel, formerly
Assistant General
Counsel (since September
1997) of John Nuveen &
Co. Incorporated; Vice
President and Assistant
Secretary of Nuveen
Advisory Corp. and
Nuveen Institutional
Advisory Corp.;
Assistant Secretary of
The John Nuveen Company
(since May 1994);
Chartered Financial
Analyst.
</TABLE>
- --------------------------------------------------------------------------------
- --------
* Mr. Schwertfeger is an interested person of the Fund.
+ Person is an affiliate of the Fund and an affiliate of the adviser or prin-
cipal underwriter.
S-21
<PAGE>
Timothy R. Schwertfeger and Peter R. Sawers serve as members of the Executive
Committee of the Board of Trustees. The Executive Committee, which meets be-
tween regular meetings of the Board of Trustees, is authorized to exercise all
of the powers of the Board of Trustees provided that the scope of the powers of
the Executive Committee, unless otherwise specifically authorized by the full
Board, shall be limited to (i) emergency matters where assembling the full
Board in a timely manner is impracticable (and in which event management would
take all reasonable steps to quickly notify the individual Board members of the
actions taken by the Executive Committee), or (ii) matters of an administrative
or ministerial nature.
The trustees of the Trust are directors or trustees, as the case may be, of 36
Nuveen open-end portfolios and of 55 Nuveen closed-end funds. Mr. Schwertfeger
is also trustee of 11 Nuveen open-end and closed-end funds advised by Nuveen
Institutional Advisory Corp.
The following table sets forth compensation paid by the Fund, as its predeces-
sor, during the fiscal year ended February 28, 1999, to each of the trustees.
The Fund has no retirement or pension plans. The officers and trustees affili-
ated with Nuveen serve without any compensation from the Fund.
<TABLE>
<CAPTION>
Total Compensation
From the Fund and
Compensation Fund Complex Paid
Name of Trustee from the Fund to Trustees
- --------------------------------------------------------------------------------
<S> <C> <C>
Robert P. Bremner.............................. $190 $71,500
Lawrence H. Brown.............................. $199 $79,000
Anne E. Impellizzeri........................... $190 $71,500
Peter R. Sawers................................ $190 $72,000
William J. Schneider........................... $190 $71,500
Judith M. Stockdale............................ $190 $72,000
</TABLE>
Each trustee who is not affiliated with Nuveen or Nuveen Advisory will receive
a fee. The Trust requires no employees other than its officers, all of whom are
compensated by Nuveen.
S-22
<PAGE>
INVESTMENT ADVISER AND INVESTMENT MANAGEMENT AGREEMENT
Nuveen Advisory acts as investment adviser for the Fund and in such capacity
manages the investment and reinvestment of the Fund's assets. Nuveen Advisory
also administers the Trust's business affairs, provides office facilities and
equipment and certain clerical, bookkeeping and administrative services, and
permits any of its officers or employees to serve without compensation as
trustees or officers of the Trust if elected to such positions.
Pursuant to an investment management agreement between Nuveen Advisory and the
Trust, the Fund has agreed to pay annual management fees at the rate set forth
below, which are based on the Fund's average daily net asset value:
<TABLE>
<CAPTION>
Average Daily Net Asset Value Management Fee
- ---------------------------------------------
<S> <C>
First $125M 0.4000 of 1%
Next $125M 0.3875 of 1%
Next $250M 0.3750 of 1%
Next $500M 0.3625 of 1%
Next $1B 0.3500 of 1%
Over $2B 0.3250 of 1%
</TABLE>
Through December 31, 1999, Nuveen Advisory has undertaken to reimburse Fund ex-
penses in an amount necessary to limit total operating expenses to .55 of 1% of
the Fund's daily net asset value. Thereafter, Nuveen Advisory may choose to
modify, continue or discontinue these reimbursements at its sole discretion.
Before June 1999, Nuveen Advisory's annual management fees were calculated at
the rates set forth below, which are based on the Fund's average daily net as-
set value;
<TABLE>
<CAPTION>
Average Daily Net Asset
Value Management Fee
- ------------------------------------------
<S> <C>
For the first $500 million .400 of 1%
For the next $500 million .375 of 1%
For assets over $1 billion .350 of 1%
</TABLE>
For the periods before June 1999, Nuveen Advisory had agreed to waive all or a
portion of its management fee or reimburse certain expenses of the Fund in or-
der to prevent total operating expenses of (including Nuveen Advisory's manage-
ment fee, but excluding interest, taxes, fees incurred in acquiring and dispos-
ing of portfolio securities, any asset-based distribution or service fees and,
to the extent permitted, extraordinary expenses) in any fiscal year from ex-
ceeding .55 of 1% of the average daily net asset value of the Fund. Nuveen Ad-
visory could also voluntarily agree to reimburse additional expenses from time
to time, which could be terminated at any time in its discretion. For the last
three fiscal years, the Fund, as its predecessor, paid net management fees to
Nuveen Advisory as follows:
<TABLE>
<S> <C> <C> <C> <C> <C>
Management Fees
Net of Expense Fee Waivers and
Reimbursement Expense Reimbursements
Paid to Nuveen Advisory for
for the Year Ended the Year Ended
-------------------------------------------------
2/28/97 2/28/98 2/28/99 2/28/97 2/28/98 2/28/99
---------------------------------
$ 7,960 $15,559 $107,183 $95,248
</TABLE>
S-24
<PAGE>
Nuveen Advisory is a wholly-owned subsidiary of John Nuveen & Co. Incorporated
("Nuveen"), the Funds' principal underwriter. Nuveen and its affiliates have
sponsored or underwritten more than $60 billion of investment company securi-
ties. Over 1,300,000 individuals have invested to date in Nuveen's funds and
trusts. Founded 1898, Nuveen is a subsidiary of The John Nuveen Company which,
in turn, is approximately 78% owned by The St. Paul Companies, Inc. ("St.
Paul"). St. Paul is located in St. Paul, Minnesota, and is principally engaged
in providing property-liability insurance through subsidiaries.
Nuveen Advisory's portfolio managers call upon the resources of Nuveen's Re-
search Department. The Nuveen Research Department reviews more than $100 bil-
lion in municipal bonds every year.
The Fund, the other Nuveen funds, Nuveen Advisory, and other related entities
have adopted a code of ethics which essentially prohibits all Nuveen fund man-
agement personnel, including Nuveen fund portfolio managers, from engaging in
personal investments which compete or interfere with, or attempt to take advan-
tage of, the Fund's anticipated or actual portfolio transactions, and is de-
signed to assure that the interest of Fund shareholders are placed before the
interest of Nuveen personnel in connection with personal investment transac-
tions.
S-24
<PAGE>
PORTFOLIO TRANSACTIONS
Nuveen Advisory, in effecting purchases and sales of portfolio securities for
the account of the Fund, will place orders in such manner as, in the opinion of
management, will offer the best price and market for the execution of each
transaction. Portfolio securities will normally be purchased directly from an
underwriter or in the over-the-counter market from the principal dealers in
such securities, unless it appears that a better price or execution may be ob-
tained elsewhere. Portfolio securities will not be purchased from Nuveen or its
affiliates except in compliance with the Investment Company Act of 1940.
The Fund expects that all portfolio transactions will be effected on a princi-
pal (as opposed to an agency) basis and, accordingly, do not expect to pay any
brokerage commissions.
Purchases from underwriters will include a commission or concession paid by the
issuer to the underwriter, and purchases from dealers will include the spread
between the bid and asked price. Given the best price and execution obtainable,
it will be the practice of the Fund to select dealers which, in addition, fur-
nish research information (primarily credit analyses of issuers) and statisti-
cal and other services to Nuveen Advisory. It is not possible to place a dollar
value on information and statistical and other services received from dealers.
Since it is only supplementary to Nuveen Advisory's own research efforts, the
receipt of research information is not expected to reduce significantly Nuveen
Advisory's expenses. Any research benefits obtained are available to all of
Nuveen Advisory's other clients. While Nuveen Advisory will be primarily re-
sponsible for the placement of the business of the Funds, the policies and
practices of Nuveen Advisory in this regard must be consistent with the forego-
ing and will, at all times, be subject to review by the Board of Trustees.
Nuveen Advisory reserves the right to, and does, manage other investment ac-
counts and investment companies or other clients which may have investment ob-
jectives similar to the Fund. Subject to applicable laws and regulations,
Nuveen Advisory will attempt to allocate equitably portfolio transactions among
the Fund and the portfolios of its other clients purchasing securities whenever
decisions are made to purchase or sell securities by the Fund and one or more
of such other clients simultaneously. In making such allocations the main fac-
tors to be considered will be the respective investment objectives of the Fund
and such other clients, the relative size of portfolio holdings of the same or
comparable securities, the availability of cash for investment by the Fund and
such other clients, the size of investment commitments generally held by the
Fund and such other clients and opinions of the persons responsible for recom-
mending investments to the Fund and such other clients.
While this procedure could have a detrimental effect on the price or amount of
the securities available to the Fund from time to time, it is the opinion of
the Fund's Board of Trustees that the benefits available from Nuveen Advisory's
organization outweigh any disadvantage that may arise from exposure to simulta-
neous transactions.
S-25
<PAGE>
Under the Investment Company Act of 1940, the Fund may not purchase portfolio
securities from any underwriting syndicate of which Nuveen is a member except
under certain limited conditions set forth in Rule 10f-3. The Rule sets forth
requirements relating to, among other things, the type of securities purchased
by the Fund and the amount of securities which may be purchased in any one is-
sue. In addition, purchases of securities made pursuant to the terms of the
Rule must be approved at least quarterly by the Board of Trustees, including a
majority of the members thereof who are not interested persons of the Fund.
NET ASSET VALUE
As stated in the Prospectus, the net asset value of the shares of the Fund will
be determined by The Chase Manhattan Bank, the Fund's custodian, as of 12:00
noon, Eastern Time, (1) on each day on which the Federal Reserve Bank of Boston
is normally open and (2) on any day during which there is sufficient degree of
trading in the Fund's portfolio securities that the current net asset value of
the Fund shares might be materially affected by such changes in the value of
the portfolio securities. The Federal Reserve Bank of Boston is not open and
the Fund will similarly not be open on New Year's Day, Martin Luther King's
Birthday, Washington's Birthday, Good Friday, Memorial Day, Independence Day,
Labor Day, Columbus Day, Veteran's Day, Thanksgiving Day and Christmas Day. It
is possible that changing circumstances during the year will result in addition
or deletions to the above lists. The net asset value per share will be computed
by dividing the value of the portfolio securities held by the Fund, plus cash
or other assets, less liabilities, by the total number of shares outstanding at
such time.
As stated in the Prospectus, the Fund will seek to maintain a net asset value
of $1.00 per share. In this connection, the Fund values its portfolio securi-
ties at their amortized cost, as permitted by the Securities and Exchange Com-
mission (the "Commission") under Rule 2a-7 under the Investment Company Act of
1940. This method does not take into account unrealized securities gains or
losses. It involves valuing an instrument at its cost on the date of purchase
and thereafter assuming a constant amortization to maturity of any discount or
premium. While this method provides certainty in valuation, it may result in
periods during which the value of an investment, as determined by amortized
cost, is higher or lower than the price the Fund would receive if it sold the
instrument. During periods of declining interest rates, the daily yield on
shares of the Fund may tend to be higher than a like computation made by a fund
with identical investments utilizing a method of valuation based upon market
prices and estimates of market prices for all of its portfolio instruments.
Thus, if the use of the amortized cost method by the Fund resulted in a lower
aggregate portfolio value on a particular day, a prospective investor in the
Fund would be able to obtain a somewhat higher yield than would result from an
investment in a fund utilizing solely market values, and existing investors in
the Fund would receive less investment income. The converse would apply in a
period of rising interest rates.
S-26
<PAGE>
The Fund, as a condition to the use of amortized cost and the maintenance of
its per share net asset value of $1.00, must maintain a dollar-weighted average
portfolio maturity of 90 days or less, only purchase instruments having remain-
ing maturities of 397 days or less, and invest only in securities determined to
be of high quality with minimal credit risks. The Fund may invest in variable
and floating rate instruments even if they carry stated maturities in excess of
397 days, upon certain conditions contained in rules and regulations issued by
the Securities and Exchange Commission under the Investment Company Act of
1940, but will do so only if there is a secondary market for such instruments
or if they carry demand features, permissible under rules of the Commission for
money market funds, to recover the full principal amount thereof upon specified
notice at par, or both.
The Board of Trustees, pursuant to Rule 2a-7, has established procedures de-
signed to stabilize, to the extent reasonably possible, the Fund's price per
share as computed for the purpose of sales and redemptions at $1.00. Such pro-
cedures will include review of the Fund's portfolio holdings by the Board of
Trustees, at such intervals as it may deem appropriate, to determine whether
the net asset value calculated by using available market quotations or market
equivalents deviates from $1.00 per share based on amortized cost. Market quo-
tations and market equivalents used in such review may be obtained from a pric-
ing agent approved by the Board of Trustees. The Board has selected Nuveen Ad-
visory to act as pricing agent, but in the future may select an independent
pricing service to perform this function. In serving as pricing agent, Nuveen
Advisory will follow guidelines adopted by the Board, and the Board will moni-
tor Nuveen Advisory to see that the guidelines are followed. The pricing agent
will value the Fund's investment based on methods which include consideration
of yield or prices of municipal obligations of comparable quality, coupon, ma-
turity, and type; indications as to values from dealers; and general market
conditions. The pricing agent may employ electronic data processing techniques
and/or a matrix system to determine valuations. The extent of any deviation be-
tween the Fund's net asset value based on the pricing agent's market valuation
and $1.00 per share based on amortized cost will be examined by the Board of
Trustees. If such deviation exceeds 1/2 of 1%, the Board of Trustees will
promptly consider what action, if any, will be initiated. In the event the
Board of Trustees determines that a deviation exists which may result in mate-
rial dilution or other unfair results to investors or existing shareholders, it
has agreed to take such corrective action as it regards as necessary and appro-
priate, including the sale of portfolio instruments prior to maturity to real-
ize capital gains or losses or to shorten average portfolio maturity.
S-27
<PAGE>
TAX MATTERS
Federal Income Tax Matters
The following discussion of federal income tax matters is based upon the advice
of Morgan, Lewis & Bockius LLP, Washington, D.C., counsel to the Funds.
As described in the Prospectus, the Fund intends to qualify, as it has in prior
years, under Subchapter M of the Internal Revenue Code of 1986 (the "Code") for
tax treatment as a regulated investment company. In order to qualify as regu-
lated investment company, the Fund must satisfy certain requirements relating
to the source of its income, diversification of its assets, and distributions
of its income to shareholders. First, the Fund must derive at least 90% of its
annual gross income (including tax-exempt interest) from dividends, interest,
payments with respect to securities loans, gains from the sale or other dispo-
sition of stock or securities, foreign currencies or other income (including
but not limited to gains from options and futures) derived with respect to its
business of investing in such stock or securities (the "90% gross income
test"). Second, the Fund must diversify its holdings so that, at the close of
each quarter of its taxable year, (i) at least 50% of the value of its total
assets is comprised of cash, cash items, United States Government securities,
securities of other regulated investment companies and other securities limited
in respect of any one issuer to an amount not greater in value than 5% of the
value of the Fund's total assets and to not more than 10% of the outstanding
voting securities of such issuer, and (ii) not more than 25% of the value of
the total assets is invested in the securities of any one issuer (other than
United States Government securities and securities of other regulated invest-
ment companies) or two or more issuers controlled by a Fund and engaged in the
same, similar or related trades or businesses.
As a regulated investment company, the Fund will not be subject to federal in-
come tax on the portion of its net investment income and net realized capital
gains that is currently distributed to shareholders in any taxable year for
which the Fund distributes at least 90% of the sum of (i) its "investment com-
pany taxable income" (which includes dividends, taxable interest, taxable orig-
inal issue discount and market discount income, income from securities lending,
net short-term capital gain in excess of long-term capital loss, and any other
taxable income other than "net capital gain" (the excess of its net long-term
capital gain over its short-term capital loss) and is reduced by deductible ex-
penses) and (ii) its "net tax-exempt interest" (the excess of its gross tax-ex-
empt interest income over certain disallowed deductions).
The Fund also intends to satisfy conditions which will enable it to designate
certain distributions as exempt interest dividends. Shareholders receiving ex-
empt interest dividends will not be subject to regular federal income tax on
the amount of such dividends.
Distributions by the Fund of net interest income received from certain taxable
investments (such as certificates of deposit, commercial paper and obligations
of the United States Government, its agencies and instrumentalities) and net
short-term capital gains realized by the Fund, if any, will be taxable to
shareholders as ordinary income whether received in cash or additional shares.
If the Fund purchases a security at a market discount, any gain realized by the
Fund upon sale or redemption of the security will be treated as taxable inter-
est income to the extent such gain does not exceed the market discount, and any
gain realized in excess of the market discount will be treated as a capital
gain. Any net long-
S-28
<PAGE>
term capital gains realized by the Fund and distributed to shareholders in cash
or additional shares will be taxable to shareholders as long-term capital gains
regardless of the length of time investors have owned shares of the Fund. The
Fund does not expect to realize significant long-term capital gains. Because
the taxable portion of the Fund's investment income consists primarily of in-
terest, none of its dividends, whether or not treated as exempt-interest divi-
dends, is expected to qualify under the Internal Revenue Code for the dividends
received deductions for corporations.
If the Fund has both tax-exempt and taxable income, it will use the "average
annual" method for determining the designated percentage that is taxable income
and designate the use of such method within 60 days after the end of the Fund's
taxable year. Under this method, one designated percentage is applied uniformly
to all distributions made during the Fund's taxable year. The percentage of in-
come designated as tax-exempt for any particular distribution may be substan-
tially different from the percentage of the Fund's income that was tax-exempt
during the period covered by the distribution.
Although dividends generally will be treated as distributed when paid, divi-
dends declared in October, November or December, payable to shareholders of
record on a specified date in one of those months and paid during the following
January, will be treated as having been distributed by the Fund (and received
by the shareholders) on December 31.
The redemption or exchange of the shares of the Fund is not expected to result
in capital gain or loss to the shareholders because the Fund's net asset value
is expected to remain constant at $1.00 per share. To the extent that the
Fund's net asset value is greater or lesser than $1.00 per share, redemptions
or exchanges may result in capital gain or loss to the shareholder.
In order to avoid a 4% federal excise tax, the Fund must distribute or be
deemed to have distributed by December 31 of each calendar year at least 98% of
its taxable ordinary income for such year, at least 98% of the excess of its
realized capital gains over its realized capital losses (generally computed on
the basis of the one-year period ending on October 31 of such year) and 100% of
any taxable ordinary income and the excess of realized capital gains over real-
ized capital losses for the prior year that was not distributed during such
year and on which the Fund paid no federal income tax. The Fund intends to make
timely distributions in compliance with these requirements and consequently it
is anticipated that they generally will not be required to pay the excise tax.
If in any year the Fund should fail to qualify under Subchapter M for tax
treatment as a regulated investment company, the Fund would incur a regular
corporate federal income tax upon its income for that year, (other than inter-
est income from tax-exempt securities) and distributions to its shareholders
out of net interest income from tax-exempt securities or other investments, or
out of net capital gains, would be taxable to shareholders as ordinary dividend
income for federal income tax purposes to the extent of the Fund's available
earnings and profits.
The Fund may invest in the type of private activity bonds the interest on which
is not federally tax-exempt to persons who are "substantial users" of the fa-
cilities financed by such bonds or "related persons" of such "substantial us-
ers." Accordingly, the Funds may not be appropriate investments for sharehold-
ers who are considered either a "substantial user" or a "related person" within
the meaning of
S-29
<PAGE>
the Code. In general, a "substantial user" of a facility financed from the pro-
ceeds of private activity bonds includes a "non-exempt person who regularly
uses a part of such facility in his trade or business." "Related persons" are
in general defined to include persons among whom there exists a relationship
either by family or business, which would result in a disallowance of losses in
transactions among them under various provisions of the Code (or if they are
members of the same controlled group of corporations under the Code). This in-
cludes a partnership and each of its partners (including their spouses and mi-
nor children) and an S corporation and each of its shareholders (and their
spouses and minor children). Various combinations of these relationships may
also constitute "related persons" under the Code. For additional information,
investors should consult their tax advisers before investing in the Fund.
Federal tax law imposes an alternative minimum tax with respect to both corpo-
rations and individuals. Interest on certain securities, such as bonds issued
to make loans for housing purposes or to private entities (but not for certain
tax-exempt organizations such as universities and non-profit hospitals), is in-
cluded as an item of tax preference in determining the amount of a taxpayer's
alternative minimum taxable income. To the extent that the Fund receives income
from securities subject to the alternative minimum tax, a portion of the divi-
dends paid by it, although otherwise exempt from federal income tax, will be
taxable to shareholders to the extent that their tax liability is determined
under the alternative minimum tax regime. The Fund will annually supply share-
holders with a report indicating the percentage of the Fund income attributable
to securities subject to the federal alternative minimum tax.
In addition, the alternative minimum taxable income for corporations is in-
creased by 75% of the difference between an alternative measure of income ("ad-
justed current earnings") and the amount otherwise determined to be the alter-
native minimum taxable income. Interest on all securities, and therefore all
distributions by the Fund that would otherwise be tax exempt, is included in
calculating a corporation's adjusted current earnings.
Individuals whose provisional income exceeds a base amount will be subject to
Federal income tax on up to one-half of their social security or railroad re-
tirement benefits. Provisional income currently includes adjusted gross income,
one-half of social security benefits and tax-exempt interest, including exempt-
interest dividends from the Fund. Individuals whose modified income exceeds the
adjusted base amount are required to include in gross income up to 85% of their
social security or railroad retirement benefits.
The Code provides that interest on indebtedness incurred or continued to pur-
chase or carry shares of any Fund is not deductible. Under rules used by the
IRS for determining when borrowed funds are considered used for the purpose of
purchasing or carrying particular assets, the purchase of shares of the Fund
may be considered to have been made with borrowed funds even though such funds
are not directly traceable to the purchase of shares.
The Fund is required in certain circumstances to withhold 31% of taxable divi-
dends and certain other payments paid to non-corporate holders of shares who
have not furnished to the Fund their correct taxpayer identification number (in
the case of individuals, their social security number) and certain certifi-
cates, or who are otherwise subject to back-up withholding.
S-30
<PAGE>
The foregoing is a general and abbreviated summary of the provisions of the
Code and Treasury Regulations presently in effect as they directly govern the
taxation of the Fund and their shareholders. For complete provisions, reference
should be made to the pertinent Code sections and Treasury Regulations. The
Code and Treasury Regulations are subject to change by legislative or adminis-
trative action, and any such change may be retroactive with respect to transac-
tions of the Fund. Shareholders are advised to consult their own tax advisers
for more detailed information concerning the federal taxation of the Fund and
the income tax consequences to their shareholders.
State Tax Matters
The following is based upon the advice of Morgan, Lewis & Bockius LLP, Washing-
ton, D.C., counsel to the Fund, and assumes that the Fund will be qualified as
a regulated investment company under Subchapter M of the Code and will be qual-
ified thereunder to pay exempt interest dividends.
Individual shareholders of the Fund who are subject to New York State (or New
York City) personal income taxation will not be required to include in their
New York adjusted gross income that portion of their dividends which (1) are
attributable to interest on any obligations of New York or its political subdi-
visions or to interest on obligations of the United States, its territories,
possessions or instrumentalities that are exempt from state taxation under fed-
eral law, and (2) are designated by the Fund as New York exempt-interest divi-
dends in a written notice to shareholders not later than 60 days after the
close of the Fund's taxable year. Dividends which are not designated as New
York exempt-interest dividends will be included in New York adjusted gross in-
come as ordinary income.
Distributions to individual shareholders of capital gain dividends (as deter-
mined for federal income tax purposes) will be included in their New York ad-
justed gross income as capital gains. Distributions to individual shareholders
of the New York Fund of dividends derived from any net income received from
taxable temporary investments and any net realized short-term capital gains
will be included in their New York adjusted gross income as ordinary income.
Present New York law taxes long-term capital gains at the rates applicable to
ordinary income.
Gain or loss, if any, resulting from an exchange or redemption of shares of the
New York Fund that is recognized by individual shareholders of the New York
Fund for federal income tax purposes will be recognized for purposes of New
York State (or New York City) personal income taxation.
Generally, corporate shareholders which are subject to New York State franchise
taxation (or New York City general corporation taxation) will be taxed upon
their entire net income, business and investment capital, or at a flat rate
minimum tax. Entire net income will include dividends received from the Fund,
as well as any gain or loss recognized from an exchange or redemption of Fund
shares that is recognized for federal income tax purposes. Investment capital
will include the corporate shareholder's shares of the Fund.
Fund shares will be exempt from local property taxes in New York State and New
York City, but will be includible in the New York gross estate of a deceased
individual holder who is a resident of New York for purposes of the New York
Estate Tax.
S-31
<PAGE>
The foregoing is a general and abbreviated summary of some of the important
state tax provisions of designated states presently in effect as they directly
govern the taxation of the Funds or their shareholders. The foregoing state
tax information assumes that each Fund qualifies as a regulated investment
company for federal income tax purposes under subchapter M of the Code, and
that the amounts so designated by each Fund to its shareholders qualify as
"exempt-interest dividends" under Section 852(b)(5) of the Code. These state
provisions are subject to change by legislative or administrative action, and
any such change may be retroactive with respect to transactions of the Funds.
Shareholders of the Funds are advised to consult their own tax advisers in
that regard.
PERFORMANCE INFORMATION
The historical performance of the Fund may be expressed in terms of "yield,"
"effective yield" or "taxable equivalent yield." The "yield " of the Fund re-
fers to the rate of income generated by an investment in the series over a
specified seven-day period, expressed as an annualized figure. "Effective
yield" is calculated similarly except that, when annualized, the income earned
by the investment is assumed to be reinvested. Due to this compounding effect,
the effective yield will be slightly higher than the yield. "Taxable equiva-
lent yield" is the yield that a taxable investment would need to generate in
order to equal the series' yield on an after-tax basis for an investor in a
stated bracket) often the bracket with the highest marginal tax rate). A tax-
able equivalent yield quotation for a given series will be higher than the
yield or the effective yield quotation for the series. The yield figures will
fluctuate over time. A comparison of tax-exempt and taxable equivalent yields
is one element to consider in making an investment decision. The Fund may from
time to time in its advertising and sales materials compare the then current
yield as of the most recent quarter of the Fund with the yield on taxable in-
vestments such as corporate or U.S. Government bonds, bank CDs and money mar-
ket accounts or money market funds, each of which has investment characteris-
tics that may differ from those of the Fund. U.S. Government bonds, for exam-
ple, are backed by the full faith and credit of the U.S. Government and bank
CDs and money market accounts are insured by an agency of the federal govern-
ment. Bank money market accounts and money market funds provide stability of
principal, but pay interest at rates that vary with the condition of the
short-term taxable debt market. The investment characteristics of the Fund are
described more fully elsewhere in this Prospectus.
Any given performance quotation or performance comparison for the fund is
based on historical earnings and should not be considered as representative of
the performance of the fund for any future period.
Yield is computed in accordance with a standard method prescribed by rules of
the Securities and Exchange Commission. Under that method, current yield is
based on a seven-day period and is computed as follows: the series' net in-
vestment income per share for the period is divided by the price per share
(expected to remain constant at $1.00) at the beginning of the period, the re-
sult (the "base period return") is divided by seven and multiplied by 365, and
the resulting figure is carried to the nearest hundredth of one percent. For
the purpose of this calculation, the series' net investment income per share
includes its accrued interest income plus or minus amortized purchase discount
or premium less accrued expenses, but does not include realized capital gains
or losses or unrealized appreciation or depreciation of investments.
S-32
<PAGE>
Effective yield is calculated by taking the base period return (computed as de-
scribed above) and calculating the effect of assumed compounding. The formula
for effective yield is: (base period return +1) 365/7 -1. Based on the seven-
day period ended February 28, 1999, the yield and effective yield was % and
%, respectively.
Taxable equivalent yield is computed by dividing that portion of the fund's
yield which is tax-exempt by 1 minus the stated combined federal and state in-
come tax rate and adding the result to that portion, if any, of the yield of
the fund that is not tax-exempt. Based upon (1) a combined 1999 federal and
California income tax of 45.2%, and (2) the yield for the fund as described
above for the seven-day period ended February 28, 1999, the taxable equivalent
yield for the fund for that period was 5.53%.
Yield will fluctuate, and the publication of annualized yield quotations is not
a representation of what an investment in the fund will actually yield for any
given future period. Actual yields will depend not only on changes in interest
rates on money market instruments during the period in question, but also on
such matters as the expenses attributable to the fund.
In reports or other communications to shareholders or in advertising and sales
literature, the fund may compare its performance to that of other money market
mutual funds tracked by Lipper Analytical Services, Inc. ("Lipper"), by
Donoghue's Money fund Report ("Donoghue's") or similar services or by financial
publications such as Barron's, Changing Times, Forbes and Money Magazine. Per-
formance comparisons by these indexes, services or publications may rank mutual
funds over different periods of time by means of aggregate, average, year-by-
year or other types of performance figures. Lipper performance calculations in-
clude the reinvestment of all capital gain and income dividends for the periods
covered by the calculations. As reported by Donoghue's all investment results
represent total return (annualized results for the period net of management
fees and expenses) and one year investment results are effective annual yields
assuming reinvestment of dividends.
A comparison of tax-exempt and taxable equivalent yields is one element to con-
sider in making an investment decision. The Fund may from time to time in its
advertising and sales materials compare its then current yields as of a recent
date with the yields on taxable investments such as corporate or U.S. Govern-
ment bonds and bank CDs or money market accounts, each of which has investment
characteristics that may differ from those of the Fund. U.S. Government bonds,
for example, are backed by the full faith and credit of the U.S. Government,
and bank CDs and money market accounts are generally shorter term investments
insured by an agency of the federal government. Bank money market accounts and
money market funds provide stability of principal but pay interest at rates
which vary with the condition of the short-time taxable debt market.
S-33
<PAGE>
The following tables show the effects for individuals of federal income taxes
on the amount that those subject to a given tax rate would have to put into a
tax-free investment in order to generate the same after-tax income as a taxable
investment.*
Read down to find the amount of a tax-free investment at the specified rate
that would provide the same after-tax income as a $50,000 taxable invest-
ment at the stated taxable rate.
<TABLE>
<CAPTION>
2.50% 3.00% 3.50% 4.00% 4.50% 5.00%
2.00% Tax- Tax- Tax- Tax- Tax- Tax-
Taxable Tax-Free Free Free Free Free Free Free
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
3.00% $ 51,750 $41,400 $34,500 $29,571 $25,875 $23,000 $20,700
- ---------------------------------------------------------------------
4.00% $ 69,000 $55,200 $46,000 $39,429 $34,500 $30,667 $27,600
- ---------------------------------------------------------------------
5.00% $ 86,250 $69,000 $57,500 $49,286 $43,125 $38,333 $34,500
- ---------------------------------------------------------------------
6.00% $103,500 $82,800 $69,000 $59,143 $51,750 $46,000 $41,400
- ---------------------------------------------------------------------
7.00% $120,750 $96,600 $80,500 $69,000 $60,375 $53,667 $48,300
- ---------------------------------------------------------------------
</TABLE>
*The dollar amounts in the table reflect a 31% federal income tax rate.
This table is for illustrative purposes only and is not intended to predict the
actual return you might earn on your investment. The Fund occasionally may ad-
vertise its performance in similar tables using a different current tax rate
than that shown here. The tax rate shown here may be higher or lower than your
actual tax rate; a higher tax rate would tend to make the dollar amounts in the
table lower, while a lower tax rate would make the amounts higher. You should
consult your tax adviser to determine your actual tax rate.
Taxable Equivalent Yield Tables
The following tables show the combined effects for individuals of federal,
state and local income taxes on:
. what you would have to earn on a taxable investment to equal a given tax-
free yield; and
. the amount that those subject to a given combined tax rate would have to put
into a tax-free investment in order to generate the same after-tax income as
a taxable investment.
These tables are for illustrative purposes only and are not intended to predict
the actual return you might earn on a Fund investment. The Funds occasionally
may advertise their performance in similar tables using other current combined
tax rates than those shown here. The combined tax rates used in these tables
have been rounded to the nearest one-half of one percent. They are based upon
published 1999 marginal federal tax rates and marginal state tax rates cur-
rently available and scheduled to be in effect, and do not take into account
changes in tax rates that are proposed from time to time. A taxpayer's marginal
tax rate is affected by both his taxable income and his adjusted gross income.
The table assumes that federal taxable income is equal to state income subject
to tax, and for cases in which more than one state rate falls within a federal
bracket, the highest state rate corresponding to the highest income within that
federal bracket is used. The tables assume taxpayers are not subject to any al-
ternative minimum taxes and deduct any state income taxes paid on their federal
income tax returns. Unless noted otherwise, the tables do not reflect any local
taxes or any taxes other than personal income
S-34
<PAGE>
taxes. They also reflect the effect of the current federal tax limitations on
itemized deductions and personal exemptions, which were designed to phase out
certain benefits of these deductions for higher income taxpayers. These limita-
tions are subject to certain maximums, which depend on the number of exemptions
claimed and the total amount of the taxpayer's itemized deductions. For exam-
ple, the limitation on itemized deductions will not cause a taxpayer to lose
more than 80% of his allowable itemized deductions with certain exceptions. The
combined tax rates shown here may be higher or lower than your actual combined
tax rate.
Combined federal and New York state marginal tax rates for joint taxpayers with
four personal exemptions
<TABLE>
<CAPTION>
Federal
Federal Adjusted Combined Tax-Free Yield
Taxable Gross State and 2.00% 2.50% 3.00% 3.50% 4.00% 4.50% 5.00%
Income Income Federal ---- ---- ---- ---- ---- ---- ----
(1,000's) (1,000's) Tax Rate** Taxable Equivalent Yield
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0- 42,350 $ 0-100,000 21.0% 2.53 3.16 3.80 4.43 5.06 5.70 6.33
100,000-124,500 22.0 2.56 3.21 3.85 4.49 5.13 5.77 6.41
42,350-102,300 0-100,000 33.0 2.99 3.73 4.48 5.22 5.97 6.72 7.46
100,000-124,500 34.0 3.03 3.79 4.55 5.30 6.06 6.82 7.58
124,500-150,000 35.0 3.08 3.85 4.62 5.38 6.15 6.92 7.69
150,000-186,800 34.0 3.03 3.79 4.55 5.30 6.06 6.82 7.58
102,300-155,950 0-100,000 35.5 3.10 3.88 4.65 5.43 6.20 6.98 7.75
100,000-124,500 37.0 3.17 3.97 4.76 5.56 6.35 7.14 7.94
124,500-150,000 38.0 3.23 4.03 4.84 5.65 6.45 7.26 8.06
150,000-186,800 36.5 3.15 3.94 4.72 5.51 6.30 7.09 7.87
186,800-309,300 39.0 3.28 4.10 4.92 5.74 6.56 7.38 8.20
155,950-278,450 124,500-150,000 42.5 3.48 4.35 5.22 6.09 6.96 7.83 8.70
150,000-186,800 41.5 3.42 4.27 5.13 5.98 6.84 7.69 8.55
186,800-309,300 44.5 3.60 4.50 5.41 6.31 7.21 8.11 9.01
Over 309,300 41.5 3.42 4.27 5.13 5.98 6.84 7.69 8.55
Over 278,450 186,800-309,300 48.0 3.85 4.81 5.77 6.73 7.69 8.65 9.62
Over 309,300 45.0 3.64 4.55 5.45 6.36 7.27 8.18 9.09
- -----------------------------------------------------------------------------------------
</TABLE>
S-35
<PAGE>
Combined federal and New York state marginal tax rates for single taxpayers
with one personal exemption
<TABLE>
<CAPTION>
Federal
Federal Adjusted Combined Tax-Free Yield
Taxable Gross State and 2.00% 2.50% 3.00% 3.50% 4.00% 4.50% 5.00%
Income Income Federal ---- ---- ---- ---- ---- ---- ----
(1,000's) (1,000's) Tax Rate** Taxable Equivalent Yield
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0- 25,350 $ 0-100,000 21.0% 2.53 3.16 3.80 4.43 5.06 5.70 6.33
100,000-124,500 21.5 2.55 3.18 3.82 4.46 5.10 5.73 6.37
25,350- 61,400 0-100,000 33.0 2.99 3.73 4.48 5.22 5.97 6.72 7.46
100,000-124,500 33.5 3.01 3.76 4.51 5.26 6.02 6.77 7.52
61,400-128,100 0-100,000 35.5 3.10 3.88 4.65 5.43 6.20 6.98 7.75
100,000-124,500 36.5 3.15 3.94 4.72 5.51 6.30 7.09 7.87
124,500-150,000 38.0 3.23 4.03 4.84 5.65 6.45 7.26 8.06
150,000-247,000 37.5 3.20 4.00 4.80 5.60 6.40 7.20 8.00
128,100-278,450 124,500-150,000 42.5 3.48 4.35 5.22 6.09 6.96 7.83 8.70
150,000-247,000 42.0 3.45 4.31 5.17 6.03 6.90 7.76 8.62
Over 247,000 41.5 3.42 4.27 5.13 5.98 6.84 7.69 8.55
Over 278,450 Over 247,000 45.0 3.64 4.55 5.45 6.36 7.27 8.18 9.09
- -----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
For an after-tax return
equal to that provided by Your tax-free investment may be less*
a 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0%
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$50,000 in a 3% taxable
investment $ 48,000 $38,400 $32,000 $27,429 $24,000 $21,333 $19,200
$50,000 in a 4% taxable
investment 64,000 51,200 42,667 36,571 32,000 28,444 25,600
$50,000 in a 5% taxable
investment 80,000 64,000 53,333 45,714 40,000 35,556 32,000
$50,000 in a 6% taxable
investment 96,000 76,800 64,000 54,857 48,000 42,667 38,400
$50,000 in a 7% taxable
investment 112,000 89,600 74,667 64,000 56,000 49,778 44,800
- ---------------------------------------------------------------------------------------------
</TABLE>
* The dollar amounts in the table reflect a 36.0% combined federal and state
tax rate.
** The table also reflects the New York State supplemental income tax based
upon a taxpayer's New York State taxable income and New York State adjusted
gross income. This supplemental tax results in an increased marginal state
income tax rate to the extent a taxpayer's New York State adjusted gross in-
come ranges between $100,000 and $150,000. Although the table does reflect
the effect of the state limitation on itemized deductions that corresponds to
the federal limitation, it does not reflect additional limitations under
which a New York taxpayer could lose up to an additional 50 percent of his
otherwise allowable itemized deductions, because the effect of this limita-
tion varies according to the particular amount of his itemized deductions.
The application of this limit may result in a higher tax rate than indicated
in the table for joint taxpayers with a New York adjusted gross income of
$200,000 to $250,000 or $475,000 to $525,000 or single taxpayers with a New
York adjusted gross income of $100,000 to $150,000 or $475,000 to $525,000.
The table assumes that a taxpayer's New York adjusted gross income equals his
federal adjusted gross income. The table does not reflect the treatment of
various state and city tax credits that could affect the tax rate of particu-
lar New York taxpayers.
For example, $50,000 in a 5% taxable investment earns the same after-tax return
as $45,714 in a 3.5% tax-free Nuveen investment.
S-36
<PAGE>
Combined federal, New York state and New York City marginal tax rates for joint
taxpayers with four personal exemptions
<TABLE>
<CAPTION>
Federal
Federal Adjusted Combined Tax-Free Yield
Taxable Gross State and 2.00% 2.50% 3.00% 3.50% 4.00% 4.50% 5.00%
Income Income Federal ---- ---- ---- ---- ---- ---- -----
(1,000's) (1,000's) Tax Rate** Taxable Equivalent Yield
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0-
42,350 $ 0-100,000 24.5% 2.65 3.31 3.97 4.64 5.30 5.96 6.62
100,000-124,500 26.0 2.70 3.38 4.05 4.73 5.41 6.08 6.76
42,350-
102,300 0-100,000 36.0 3.13 3.91 4.69 5.47 6.25 7.03 7.81
100,000-124,500 37.5 3.20 4.00 4.80 5.60 6.40 7.20 8.00
124,500-150,000 38.5 3.25 4.07 4.88 5.69 6.50 7.32 8.13
150,000-186,800 37.0 3.17 3.97 4.76 5.56 6.35 7.14 7.94
102,300-
155,950 0-100,000 39.0 3.28 4.10 4.92 5.74 6.56 7.38 8.20
100,000-124,500 40.0 3.33 4.17 5.00 5.83 6.67 7.50 8.33
124,500-150,000 41.0 3.39 4.24 5.08 5.93 6.78 7.63 8.47
150,000-186,800 40.0 3.33 4.17 5.00 5.83 6.67 7.50 8.33
186,800-309,300 42.0 3.45 4.31 5.17 6.03 6.90 7.76 8.62
155,950-
278,450 124,500-150,000 45.5 3.67 4.59 5.50 6.42 7.34 8.26 9.17
150,000-186,800 44.5 3.60 4.50 5.41 6.31 7.21 8.11 9.01
186,800-309,300 47.0 3.77 4.72 5.66 6.60 7.55 8.49 9.43
Over 309,300 44.5 3.60 4.50 5.41 6.31 7.21 8.11 9.01
Over
278,450 186,800-309,300 50.5 4.04 5.05 6.06 7.07 8.08 9.09 10.10
Over 309,300 47.5 3.81 4.76 5.71 6.67 7.62 8.57 9.52
- ------------------------------------------------------------------------------------
</TABLE>
Combined federal, New York state and New York City marginal tax rates for sin-
gle taxpayers with one personal exemption
<TABLE>
<CAPTION>
Federal Combined Tax-Free Yield
Federal Adjusted State and 2.00% 2.50% 3.00% 3.50% 4.00% 4.50% 5.00%
Taxable Gross Federal ---- ---- ---- ---- ---- ---- ----
Income Income Tax Rate** Taxable Equivalent Yield
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0- 25,350 $ 0-100,000 24.5% 2.65 3.31 3.97 4.64 5.30 5.96 6.62
100,000-124,500 25.0 2.67 3.33 4.00 4.67 5.33 6.00 6.67
25,350- 61,400 0-100,000 36.0 3.13 3.91 4.69 5.47 6.25 7.03 7.81
100,000-124,500 36.5 3.15 3.94 4.72 5.51 6.30 7.09 7.87
61,400-128,100 0-100,000 39.0 3.28 4.10 4.92 5.74 6.56 7.38 8.20
100,000-124,500 39.5 3.31 4.13 4.96 5.79 6.61 7.44 8.26
124,500-150,000 41.0 3.39 4.24 5.08 5.93 6.78 7.63 8.47
150,000-247,000 40.5 3.36 4.20 5.04 5.88 6.72 7.56 8.40
128,100-278,450 124,500-150,000 45.5 3.67 4.59 5.50 6.42 7.34 8.26 9.17
150,000-247,000 45.0 3.64 4.55 5.45 6.36 7.27 8.18 9.09
Over 247,000 44.5 3.60 4.50 5.41 6.31 7.21 8.11 9.01
Over 278,450 Over 247,000 47.5 3.81 4.76 5.71 6.67 7.62 8.57 9.52
- -----------------------------------------------------------------------------------------
</TABLE>
S-37
<PAGE>
<TABLE>
<CAPTION>
For an after-tax return
equal to that provided by Your tax-free investment may be less*
a 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0%
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$50,000 in a 3% taxable
investment $ 48,000 $38,400 $32,000 $27,429 $24,000 $21,333 $19,200
$50,000 in a 4% taxable
investment 64,000 51,200 42,667 36,571 32,000 28,444 25,600
$50,000 in a 5% taxable
investment 80,000 64,000 53,333 45,714 40,000 35,556 32,000
$50,000 in a 6% taxable
investment 96,000 76,800 64,000 54,857 48,000 42,667 38,400
$50,000 in a 7% taxable
investment 112,000 89,600 74,667 64,000 56,000 49,778 44,800
- ---------------------------------------------------------------------------------------------
</TABLE>
ADDITIONAL INFORMATION ABOUT PURCHASES AND SALES
Exchange Privileges
You may exchange shares of the Fund for the appropriate class of shares of any
other open-end management investment company with reciprocal exchange privi-
leges advised by Nuveen Advisory (the "Nuveen Funds"), into an identically reg-
istered account, provided that the Nuveen Fund into which shares are to be ex-
changed is offered in the shareholder's state of residence and that the shares
to be exchanged have been held by the shareholder for a period of at least 15
days. You may exchange Fund shares by calling (800) 257-8787 or by mailing your
written request to our Transfer Agent. Shares of Nuveen Funds purchased subject
to a front-end sales charge may be exchanged for shares of the Fund or any
other Nuveen Fund at the next determined net asset value without any front-end
sales charge. No CDSC otherwise applicable will be assessed on an exchange, and
the holding period of your investment will be carried over to the new fund for
purposes of determining any future CDSC. You may exchange Class B shares for
shares of a Nuveen money market fund. Shares of any Nuveen Fund purchased
through dividend reinvestment or through reinvestment of Nuveen Unit Trust dis-
tributions (and any dividends thereon) may be exchanged for Class A shares of
any Nuveen Fund without a front-end sales charge. Exchanges of shares with re-
spect to which no front-end sales charge has been paid will be made at the pub-
lic offering price, which may include a front-end sales charge, unless a front-
end sales charge has previously been paid on the investment represented by the
exchanged shares (i.e., the shares to be exchanged were originally issued in
exchange for shares on which a front-end sales charge was paid), in which case
the exchange will be made at net asset value. Because certain other Nuveen
Funds may determine net asset value and therefore honor purchase or redemption
requests on days when the Fund does not (generally, Martin Luther King's Birth-
day, Columbus Day and Veterans Day), exchanges of shares of one of those funds
for shares of the fund may not be effected on such days.
The total value of shares being exchanged must at least equal the minimum in-
vestment requirement of the Nuveen Fund into which they are being exchanged.
Exchanges are made based on the relative dollar values of the shares involved
in the exchange, and will be effected by redemption of shares of the Nuveen
Fund held and purchase of the shares of the other Nuveen Fund. For federal in-
come tax purposes, any such exchange constitutes a sale and purchase of shares
and may result in capital gain or loss. Before exercising any exchange, you
should obtain the Prospectus for the Nuveen Fund into which shares are to be
exchanged and read it carefully. If the registration of the account for the
Fund you are purchasing is not exactly the same as that of the Fund account
from which the exchange is made, written instructions from all holders of the
account from which the exchange is being made must be received, with signatures
guaranteed by a member of an approved Medallion Guarantee Program or in such
other manner as may be acceptable to the Fund. The exchange privilege may be
modified or
S-38
<PAGE>
discontinued at any time. If you do not wish to have telephone exchange privi-
leges, you must indicate this in the "Telephone Services" section of your Ac-
count Application or otherwise notify the Fund in writing of your desire.
Additional Information
An account will be maintained for each shareholder of record in the Fund by our
Transfer Agent. Share certificates will be issued only upon written request of
the shareholder to our Transfer Agent. No certificates are issued for frac-
tional shares. The Fund reserves the right to reject any purchase order and to
waive or increase minimum investment requirements.
Confirmations of each purchase and redemption order as well as monthly state-
ments are sent to every shareholder. Master accounts also receive a monthly
summary report setting forth the share balance and dividends earned for the
month for each sub-account established under that master account.
To assist those institutions performing their own-sub-accounting, same day in-
formation as to the Fund's daily per share income to seven decimal places and
the one-day yield to four decimal places are normally available by 3:30 p.m.,
Eastern Time.
A change in registration or transfer of shares held in the name of a
broker/dealer can only be effected by an order in good form from the
broker/dealer acting on behalf of the investor. Broker/dealers are encouraged
to open single master accounts. However, some broker/dealers may wish to use
our Transfer Agent's sub-accounting system to minimize their internal record-
keeping requirements. A broker/dealer or other investor requesting shareholder
servicing or accounting other than the master account or subaccounting service
offered by the Fund will be required to enter into a separate agreement with
the agent for these services for a fee to be determined in accordance with the
level of services to be furnished.
Banks and other organizations through which investors may purchase shares of
the Fund may impose charges in connection with purchase orders. Investors
should contact their institutions directly to determine what charges, if any,
may be imposed.
Subject to the rules of the SEC, the Fund reserves the right to suspend the
continuous offering of the shares at any time, but such suspension shall not
affect the shareholder's right of redemption as described below. The Fund also
reserves the right to reject any purchase order and to waive or increase mini-
mum investment requirements.
Telephone Redemption via Fund Direct
To redeem shares held in non-certificate form by telephone with the redemption
proceeds paid via Fund Direct-Electronic Funds Transfer, you must complete the
Telephone Services section of the enclosed Application Form and return it to
Nuveen or our Transfer Agent. If you did not authorize Telephone Redemption via
Fund Direct when you opened your account, you may do so by sending a written
request to the Fund signed by each account owner with signatures guaranteed by
a member of an approved Medallion Guarantee Program or in such other manner as
may be acceptable to the Fund.
S-39
<PAGE>
Proceeds of share redemptions made by Fund Direct will be transferred only to
the commercial bank account specified by the shareholder. Redemption proceeds
may be delayed one additional business day if the Federal Reserve Bank of Bos-
ton or the Federal Reserve Bank of New York is closed on the day the redemption
proceeds would ordinarily be wired.
If you have authorized Telephone Redemption via Fund Direct, you can take ad-
vantage of two methods of telephone redemption: regular telephone redemption
and expedited telephone redemption. You may make regular Fund Direct redemption
requests by calling Nuveen at (800) 257-8787. If a regular telephone redemption
request is received prior to 4:00 p.m. Eastern Time, the shares to be redeemed
earn income on the day the request is made, and the redemption is effected on
the following business day. For regular redemption requests received after 4:00
p.m. Eastern Time, the shares to be redeemed earn income through the following
business day, and the redemption is effected on the second business day follow-
ing the request. For all regular redemptions, you will typically receive your
Funds within three business days after your redemption is effected. You may
make expedited telephone redemption requests to redeem shares that are worth at
least $1,000 by calling Nuveen at (800) 257-8787. If an expedited redemption
request is received by 12:00 noon Eastern Time, the shares to be redeemed do
not earn income on that day, but the redemption is effected, and you will nor-
mally receive your Funds, on that day. If an expedited redemption request is
received after 12:00 noon Eastern Time, the shares to be redeemed earn income
on the day the request is received. The redemption is effected, and you will
normally receive your Funds, on the next business day following the request.
The Fund reserves the right to charge a fee for expedited redemption requests.
How to Change Authorized Redemption Instructions
In order to establish multiple accounts, or to change the account or accounts
designated to receive redemption proceeds, a written request specifying the
change must be sent to Nuveen. This request must be signed by each account
owner with signatures guaranteed by a member of an approved Medallion Guarantee
Program or in such other manner as may be acceptable to the fund. Further docu-
mentation may be required from corporations, executors, trustees or personal
representatives.
The Fund reserves the right to refuse a telephone redemption and, at its op-
tion, may limit the timing, amount or frequency of these redemptions. This pro-
cedure may be modified or terminated at any time, on 30 days' notice, by the
Fund. The Fund, the transfer agent and Nuveen will not be liable for following
telephone instructions reasonably believed to be genuine.
Redemption in Kind
The Fund has committed to pay in cash all redemption requests made by each
shareholder during any 90 day period up to the lesser of $250,000 or 1% of the
net asset value of the fund at the beginning of such period. This commitment is
irrevocable without the prior approval of the SEC and is a fundamental policy
of the Fund which may not be changed without shareholder approval. In the case
of redemption requests in excess of such amounts, the Board of Trustees re-
serves the right to have the Fund make payment in whole or in part in securi-
ties or other assets of the Fund in case of an emergency or any time a cash
distribution would impair the liquidity of the Fund to the detriment of the ex-
isting
S-40
<PAGE>
shareholders. In this event, the securities would be valued in the same manner
as the portfolio of the Fund is valued. If the recipient were to sell such se-
curities, he or she would incur brokerage charges.
Other Practices
The Fund may suspend the right of redemption or delay payment more than seven
days (a) during any period when the New York Stock Exchange is closed (other
than customary weekend and holiday closings), (b) when trading in the markets
the Fund normally utilizes is restricted, or an emergency exists as determined
by the SEC so that disposal of the Fund's investments or determination of its
net asset value is not reasonably practicable, or (c) for such other periods as
the SEC by order may permit for protection of the shareholders of the Fund.
The Fund has authorized certain brokers and firms to accept purchase and re-
demption orders on its behalf. The Fund will consider an order to be "received"
when such a broker or firm accepts the order from its customer.
In addition to the types of compensation to dealers to promote sales of Fund
shares that are described in the prospectus, Nuveen may from time to time make
additional reallowances only to certain authorized dealers who sell or are ex-
pected to sell certain minimum amounts of shares of the Nuveen Mutual Funds
during specified time periods.
SERVICE PLAN
The Fund has adopted a Service Plan Pursuant to Rule 12b-1 under the 1940 Act.
The Plan was adopted by the Board of Trustees, including a majority of direc-
tors who are not interested persons and who have no direct or indirect finan-
cial interest in the Plan, and approved by shareholders.
Under the Plan, the Fund pays an annual fee of .25% of the average daily net
assets of serviced accounts to reimburse Nuveen for compensating authorized
dealers, including Nuveen, for providing ongoing services to shareholders. Such
services generally include establishing and maintaining shareholder accounts,
processing purchase and redemption orders, arranging for bank wires and answer-
ing shareholder inquiries. Under the Plan, the Fund pays the entire amount of
the fees. Nuveen may, in its discretion and from its own resources, pay certain
firms additional amounts for services rendered to shareholders.
Under the Plan, the Controller of the Fund will report quarterly to the Board
of Trustees for its review amounts expended for services rendered under the
Plan. The Plan may be terminated at any time, without the payment of any penal-
ty, by a vote of a majority of the trustees who are not "interested persons"
and who have no direct or indirect financial interest in the Plan or by vote of
a majority of the outstanding voting securities of the applicable series of
each Fund. The Plan may be renewed from year to year if approved by a vote of
the Board of Trustees and a vote of the non-interested trustees who have no di-
rect or indirect financial interest in the Plan cast in person at a meeting
called for the purpose of voting on the Plan. The Plan may be continued only if
the trustees who vote to approve such continuance conclude, in the exercise of
reasonable business judgment and in light of their fiduciary duties under ap-
plicable law, that there is a reasonable likelihood that the Plan will benefit
the
S-41
<PAGE>
Fund and its shareholders. The Plan is intended to benefit the Fund by promot-
ing the sale of Fund shares, which in turn leads to economies of scale and
helps assure the continued viability of the Fund. The Plan may not be amended
to increase materially the cost which the Fund may bear under the Plan without
the approval of the shareholders. Any other material amendments of the Plan
must be approved by the non-interested trustees by a vote cast in person at a
meeting called for the purpose of considering such amendments. During the con-
tinuance of the Plan, the selection and nomination of the non-interested trust-
ees of the Fund will be committed to the discretion of the non-interested
trustees then in office. Nuveen's compensation under the Plan is not based on
Nuveen's expense incurred in providing services to shareholders.
No trustee nor any interested person of the Fund has any direct or indirect fi-
nancial interest in the Plan or any agreement related to the Plan.
For the fiscal year ended February 28, 1999, the Fund, as its predecessor, paid
12b-1 fees in the amount of $8,000.
OTHER INFORMATION REGARDING SHARES OF THE FUND
Shareholders should note that when a Fund dividend check has been returned to
the sender by the post office after repeated mailings, the shareholder account
will thereafter be registered for automatic reinvestment of dividends and thus
the dividend check and future dividend checks will be reinvested in additional
Fund shares. Shareholders are reminded that they need to advise the Fund
promptly in writing of any change in address.
The Glass-Steagall Act and other applicable laws, among other things, may limit
banks from engaging in the business of underwriting, selling or distributing
securities. Since the only functions of banks who may be engaged as financial
service firms is to perform administrative shareholder servicing functions, the
Fund believes that such laws should not preclude a bank from performing share-
holder services. However, future changes in either federal or state statutes or
regulations relating to the permissible activities of banks and their subsidi-
aries or affiliates, as well as judicial or administrative decisions or inter-
pretations of statutes or regulations, could prevent a bank from continuing to
perform all or a part of its shareholder servicing activities. If a bank were
prohibited from providing services to shareholders, its shareholder customers
would be permitted to remain shareholders and alternative means for continuing
the servicing of such shareholders would be sought.
Nuveen serves as the principal underwriter of the shares of the Fund pursuant
to a "best efforts" arrangement as provided by a distribution agreement with
the Fund, dated October 30, 1986 and last renewed on July 31, 1998 ("Distribu-
tion Agreement"). Pursuant to the Distribution Agreement, the Fund appointed
Nuveen to be its agent for the distribution of the Fund's shares on a continu-
ous offering basis. Nuveen sells shares to or through brokers, dealers, banks
or other qualified financial intermediaries (collectively referred to as "Deal-
ers"), or others, in a manner consistent with the Fund's then effective regis-
tration statement. Pursuant to the Distribution Agreement, Nuveen, at its own
expense, finances certain activities incident to the sale and distribution of
the Fund's shares, including printing and distributing of prospectuses and
statements of additional information to other than existing shareholders, the
printing and distributing of sales literature, advertising and payment of com-
pensation and giving of concessions to dealers. Expenses incurred in register-
ing the Fund and its shares under federal and state securities laws are paid by
the Fund.
S-42
<PAGE>
PART C: OTHER INFORMATION
Item 23. Exhibits:
(a) Declaration of Trust of Registrant. Filed as exhibit (a) to the Ini-
tial Registration Statement on Form N-1A, dated March 22, 1999 and incorpo-
rated herein by reference thereto.
(b) By-Laws of Registrant. Filed as exhibit (b) to the Initial Registra-
tion Statement on Form N-1A, dated March 22, 1999 and incorporated herein
by reference thereto.
(c) Specimen certificates of Shares of the Fund.*
(d) Investment Management Agreement.*
(e) Distribution Agreement.*
(f) Not applicable.
(g) Custodian Agreement.*
(h) Transfer Agency Agreement.*
(i) Opinion of Morgan, Lewis & Bockius LLP.*
(j) Consent of Independent Public Accountants.*
(k) Not applicable.
(l) Initial Capital Agreement.*
(m) Plan of Distribution.*
(n) Financial Data Schedules.*
(o) Multi-Class Plan.*
(p) Powers of Attorney filed herewith.
*To Be Filed By Amendment
Item 24. Persons Controlled by or Under Common Control with Registrant:
Not applicable.
Item 25. Indemnification:
Section 4 of Article XII of Registrant's Declaration of Trust provides as
follows:
Subject to the exceptions and limitations contained in this Section 4, every
person who is, a Trustee, officer, employee or agent of the Trust including
persons who serve at the request of the Trust as directors, trustees, officers,
employees or agents of another organization in which the Trust has an interest
as a shareholder, creditor or otherwise (hereinafter referred to as a "Covered
Person"), shall be indemnified by the Trust to the fullest extent permitted by
law against liability and against all expenses reasonably incurred or paid by
him in connection with any claim, action, suit or proceeding in which he be-
comes involved as a party or otherwise by virtue of his being or having been a
Trustee, director, officer, employee or agent and against amounts paid or in-
curred by him in settlement thereof.
No indemnification shall be provided hereunder to a Covered Person:
(a) against any liability to the Trust or its Shareholders by reason of a
final adjudication by the courts or other body before which the proceeding
was brought that he engaged in willful misfeasance, bad faith, gross negli-
gence or reckless disregard of the duties involved in the conduct of his
office;
(b) with respect to any matter as to which he shall have been finally ad-
judicated not to have acted in good faith in the reasonable belief that his
action was in the best interests of the Trust; or
<PAGE>
(c) in the event of a settlement or other disposition not involving a fi-
nal adjudication (as provided in paragraph (a) or (b)) and resulting in a
payment by a Covered Person, unless there has been wither a determination
that such Covered Person did not engage in willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the con-
duct of his office by the court or other approving the settlement or other
disposition or a reasonable determination, based on a review of readily
available facts (as opposed to a full trial-type inquiry), that he did not
engage in such conduct:
(i) by a vote of a majority of the Disinterested Trustees acting on
the matter (provided that a majority of the Disinterested Trustees then
in office act on the matter); or
(ii) by written opinion of the independent legal counsel.
The rights of indemnification herein provided may be insured against by poli-
cies maintained by the Trust, shall be severable, shall not affect any other
rights to which any Covered Person may now or hereafter be entitled, shall con-
tinue as to a person who has ceased to be such a Covered Person and shall inure
to the benefit of the heirs, executors and administrators of such a person.
Nothing contained herein shall affect any rights to indemnification to which
Trust personnel other than Covered Persons may be entitled by contract other-
wise under law.
Expenses of preparation and presentation of a defense to any claim, action,
suit or proceeding subject to a claim for indemnification under Section 4 shall
be advanced by the Trust prior to final disposition thereof upon receipt of an
undertaking by or on behalf of the recipient to repay such amount if it is ul-
timately determined that he is not entitled to indemnification under this Sec-
tion 4, provided that either:
(a) such undertaking is secured by a surety bond or some other appropri-
ate security or the Trust shall be insured against losses arising out of
any such advances; or
(b) a majority of the Disinterested Trustees acting on the matter (pro-
vided that a majority of the Disinterested Trustees then in office act on
the matter) or independent legal counsel in a written opinion shall deter-
mine, based upon a review of the readily available facts (as opposed to a
full trial-type inquiry), that there is reason to believe that the recipi-
ent ultimately will be found entitled to indemnification.
As used in this Section 4, a "Disinterested Trustee" is one (x) who is not an
Interested Person of the Trust (including, as such Disinterested Trustee, any-
one who has been exempted from being an Interested Person by any rule, regula-
tion or order of the Commission), and (y) against whom none of such actions,
suits or other proceedings or another action, suit or other proceeding on the
same or similar groundings is then or has been pending.
As used in this Section 4, the words "claim," "action," "suit" or "proceed-
ing" shall apply to all claims, actions, suits, proceeding (civil, criminal,
administrative or other, including appeals), actual or threatened; and the word
"liability" and "expenses" shall include without limitation, attorney's fees,
costs, judgments, amounts paid in settlement, fines, penalties and other lia-
bilities.
The trustees and officers of the Registrant are covered by an Investment
Trust Errors and Omission policy in the aggregate amount of $20,000,000 (with a
maximum deductible of $500,000) against liability and expenses of claims if
wrongful acts arising out of their position with the Registrant, except for
matters which involved willful acts, bad faith, gross negligence and willful
disregard of duty (i.e., where the insured did not act in good faith for a pur-
pose he or she reasonably believed to be in the best interest of the registrant
or where he or she shall have had reasonable cause to believe this conduct was
unlawful).
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to the Trustees, officers and controlling persons of
the Registrant pursuant to the Declaration of Trust or otherwise, the Regis-
trant has been advised that in the opinion of the Securities and Exchange
Commis-
ii
<PAGE>
sion such indemnification is against public policy as expressed in the Securi-
ties Act of 1933 and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by an officer, trustee or controlling
person of the Registrant in the successful defense of any action, suit or pro-
ceeding) is asserted by such officer, trustee or controlling person in connec-
tion with the securities being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such indem-
nification by it is against public policy as expressed in the Securities Act of
1933 and will be governed by the final adjudication of such issue.
Item 26. Business and Other Connections of Investment Adviser:
Nuveen Advisory Corp. serves as investment adviser to the following open-end
management type investment companies: Nuveen Flagship Multistate Trust I,
Nuveen Flagship Multistate Trust II, Nuveen Flagship Multistate Trust III,
Nuveen Flagship Multistate Trust IV, Nuveen Flagship Municipal Trust, Nuveen
Taxable Funds Inc., Nuveen California Tax-Free Fund, Inc., Nuveen Tax-Free
Money Market Fund, Inc., Nuveen Tax-Exempt Money Market Fund, Inc., Nuveen
Money Market Trust and Nuveen Tax-Free Reserves, Inc. It also serves as invest-
ment adviser to the following closed-end management type investment companies:
Nuveen Municipal Value Fund, Inc., Nuveen California Municipal Value Fund,
Inc., Nuveen Fund, Inc., Nuveen Performance Plus Municipal Fund, Inc., Nuveen
California Performance Plus Municipal Fund, Nuveen New York Performance Plus
Municipal Fund, Inc., Nuveen Municipal Advantage Fund, Inc., Nuveen Municipal
Market Opportunity Fund, Inc., Nuveen California Municipal Market Opportunity
Fund, Inc., Nuveen Investment Quality Municipal Fund, Inc., Nuveen California
Investment Quality Municipal Fund, Inc., Nuveen New York Investment Quality Mu-
nicipal Fund, Inc., Nuveen Insured Quality Municipal Fund, Inc., Nuveen Florida
Investment Quality Municipal Fund, Nuveen New Jersey Investment Quality Munici-
pal Fund, Inc., Nuveen Pennsylvania Investment Quality Municipal Fund, Inc.,
Nuveen Select Quality Municipal Fund, Inc., Nuveen California Select Quality
Municipal Fund, Inc., Nuveen New York Select Quality Municipal Fund, Inc.,
Nuveen Quality Income Municipal Fund, Inc., Nuveen Insured Municipal Opportu-
nity Fund, Inc., Nuveen Florida Quality Income Municipal Fund, Nuveen Michigan
Quality Income Municipal Fund, Inc., Nuveen Ohio Quality Income Municipal Fund,
Inc., Nuveen Texas Income Municipal Fund, Inc., Nuveen California Quality In-
come Municipal Fund, Inc., Nuveen New York Quality Income Fund, Inc., Nuveen
Premium Income Municipal Fund 2, Inc., Nuveen Insured California Premium Income
Municipal Fund, Nuveen Insured New York Premium Income Municipal Fund, Inc.,
Nuveen Select Maturities Municipal Fund, Nuveen Arizona Premium Income Munici-
pal Fund, Inc., Nuveen Insured Florida Premium Income Municipal Fund, Nuveen
Michigan Premium Income Municipal Fund, Inc., Nuveen New Jersey Premium Income
Municipal Fund, Inc., Nuveen Premium Income Municipal Fund 4, Inc., Nuveen In-
sured California Premium Income Municipal Fund 2, Inc., Nuveen Pennsylvania
Premium Income Municipal Fund 2, Inc., Nuveen Maryland Premium Income Municipal
Fund, Nuveen Washington Premium Income Municipal Fund, Nuveen New Jersey Pre-
mium Income Municipal Fund 2, Inc., Nuveen Connecticut Premium Income Municipal
Fund, Nuveen Georgia Premium Income Municipal Fund, Nuveen Missouri Premium In-
come Municipal Fund, Nuveen North Carolina Premium Income Municipal Fund,
Nuveen California Premium Income Municipal Fund, and Nuveen Insured Premium In-
come Municipal Fund 2. Nuveen Advisory Corp. has no other clients or business
at the present time. The principal business address for all of these investment
companies is 333 West Wacker Drive, Chicago, Illinois 60606.
For a description of other business, profession, vocation or employment of a
substantial nature in which any director or officer, other than Timothy R.
Schwertfeger and John P. Amboian, of the investment adviser has engaged during
the last two years for his account or in the capacity of director, officer, em-
ployee, partner or trustee, see the description under "Management" in the
Statement of Additional Information.
iii
<PAGE>
Timothy R. Schwertfeger is Chairman and Director of Nuveen Advisory Corp.,
the investment adviser. Mr. Schwertfeger has, during the last two years, been
Chairman and Director and formerly Executive Vice President and Director of
the John Nuveen Company, John Nuveen & Co. Incorporated, and Nuveen Institu-
tional Advisory Corp.; Chairman and Director (since January 1997) of Nuveen
Asset Management, Inc.; Director (since 1996) of Institutional Capital Corpo-
ration.
Item 27. Principal Underwriters:
(a) John Nuveen & Co., Incorporated ("Nuveen") acts as principal underwriter
to the following open-end management type investment companies: Nuveen Flag-
ship Multistate Trust I, Nuveen Flagship Multistate Trust II, Nuveen Flagship
Multistate Trust III, Nuveen Flagship Multistate Trust IV, Nuveen Flagship Mu-
nicipal Trust, Nuveen California Tax-Free Fund, Inc., Nuveen Tax-Free Money
Market Fund, Inc., Nuveen Tax-Exempt Money Market Fund, Inc., Nuveen Money
Market Trust, Nuveen Tax-Free Reserves, Inc., Nuveen Taxable Funds Inc.,
Nuveen Investment Trust and Nuveen Investment Trust II and III. Nuveen also
acts as depositor and principal underwriter of the Nuveen Tax-Exempt Unit
Trust and Nuveen Unit Trusts, registered unit investment trusts. Nuveen has
also served or is serving as co-managing underwriter to the following closed-
end management type investment companies: Nuveen Municipal Value Fund, Inc.,
Nuveen California Municipal Value Fund, Inc., Nuveen New York Municipal Value
Fund, Inc., Nuveen Municipal Income Fund, Inc., Nuveen Premium Income Munici-
pal Fund, Inc., Nuveen Performance Plus Municipal Fund, Inc., Nuveen Califor-
nia Performance Plus Municipal Fund, Inc., Nuveen New York Performance Plus
Municipal Fund, Inc., Nuveen Municipal Advantage Fund, Inc., Nuveen Investment
Quality Municipal Fund, Inc., Nuveen California Investment Quality Municipal
Fund, Inc., Nuveen New York Investment Quality Municipal Fund, Inc., Nuveen
Insured Quality Municipal Fund, Inc., Nuveen Florida Investment Quality Munic-
ipal Fund, Nuveen New Jersey Investment Quality Municipal Fund, Inc., Nuveen
Pennsylvania Investment Quality Municipal Fund, Nuveen Select Quality Munici-
pal Fund, Inc., Nuveen California Select Quality Municipal Fund, Inc., Nuveen
New York Select Quality Municipal Fund, Inc., Nuveen Quality Income Municipal
Fund, Inc., Nuveen Insured Municipal Opportunity Fund, Inc., Nuveen Florida
Quality Income Municipal Fund, Nuveen Michigan Quality Income Municipal Fund,
Inc., Nuveen Ohio Quality Income Municipal Fund, Inc., Nuveen Texas Quality
Income Municipal Fund, Nuveen California Quality Income Municipal Fund, Inc.,
Nuveen New York Quality Income Municipal Fund, Inc., Nuveen Premier Municipal
Income Fund, Inc., Nuveen Premier Insured Municipal Income Fund, Inc., Nuveen
Premium Income Municipal Fund 2, Inc., Nuveen Insured California Premium In-
come Municipal Fund, Inc., Nuveen Insured New York Premium Income Municipal
Fund, Inc., Nuveen Select Maturities Municipal Fund, Nuveen Michigan Premium
Income Municipal Fund, Inc., Nuveen New Jersey Premium Income Municipal Fund,
Inc., Nuveen Premium Income Municipal Fund 4, Inc., Nuveen Insured California
Premium Income Municipal Fund 2, Inc., Nuveen Pennsylvania Premium Income Mu-
nicipal Fund 2, Inc., Nuveen Maryland Premium Income Municipal Fund, Nuveen
Washington Premium Income Municipal Fund, Nuveen Connecticut Premium Income
Municipal Fund, Nuveen Georgia Premium Income Municipal Fund, Nuveen Missouri
Premium Income Municipal Fund, Nuveen Maryland Premium Income Municipal Fund,
Nuveen North Carolina Premium Income Municipal Fund, Nuveen California Premium
Income Municipal Fund, Nuveen Insured Premium Income Municipal Fund, Nuveen
Select Tax-Free Income Portfolio 2, Nuveen Insured California Select Tax-Free
Income Portfolio, Nuveen Insured New York Select Tax-Free Income Portfolio,
Nuveen California Dividend Advantage Fund, Nuveen New York Dividend Advantage
Municipal Fund, Nuveen Dividend Advantage Municipal Fund and Nuveen Select
Tax-Free Income Portfolio 3.
iv
<PAGE>
(b)
<TABLE>
<CAPTION>
Name and
Principal
Business Positions and Offices Positions and Offices
Address with Underwriter with Registrant*
---------------------------------------------------------------------------
<S> <C> <C>
Timothy R. Chairman of the Board, Chief Chairman of the Board and
Schwertfeger Executive Officer and Director Trustee
333 West
Wacker Drive
Chicago, IL
60606
John P. Executive Vice-President and None
Amboian Chief Financial Officer
333 West
Wacker Drive
Chicago, IL
60606
William Vice President None
Adams IV
333 West
Wacker Drive
Chicago, IL
60606
Alan G. Vice President and Secretary Vice President and Assistant
Berkshire Secretary
333 West
Wacker Drive
Chicago, IL
60606
Clifton L. Vice President None
Fenton
333 West
Wacker Drive
Chicago, IL
60606
Kathleen M. Vice President None
Flanagan
333 West
Wacker Drive
Chicago, IL
60606
Stephen D. Vice President Vice President and Controller
Foy
333 West
Wacker Drive
Chicago, IL
60606
Robert D. Vice President None
Freeland
333 West
Wacker Drive
Chicago, IL
60606
Michael G. Vice President None
Gaffney
333 West
Wacker Drive
Chicago, IL
60606
Anna R. Vice President None
Kucinskis
333 West
Wacker Drive
Chicago, IL
60606
Robert B. Vice President None
Kuppenheimer
1990
MacArthur
Blvd.
Irvine, CA
92612
Larry W. Vice President and Assistant Vice President and Assistant
Martin Secretary Secretary
333 West
Wacker Drive
Chicago, IL
60606
</TABLE>
V
<PAGE>
<TABLE>
<CAPTION>
Name and
Principal
Business Positions and Offices Positions and Offices
Address with Underwriter with Registrant
--------------------------------------------------------------------------
<S> <C> <C>
Thomas C. Vice President None
Muntz
333 West
Wacker
Drive
Chicago, IL
60606
Stuart W. Vice President None
Rogers
333 West
Wacker
Drive
Chicago, IL
60606
Bradford W. Vice President None
Shaw, Jr.
333 West
Wacker
Drive
Chicago, IL
60606
Paul C. Vice President None
Williams
333 West
Wacker
Drive
Chicago, IL
60606
Margaret E. Vice President and Corporate None
Wilson Controller
333 West
Wacker
Drive
Chicago, IL
60606
Gifford R. Vice President and Assistant Vice President and Secretary
Zimmerman Secretary
333 West
Wacker
Drive
Chicago, IL
60606
</TABLE>
Item 28. Location of Accounts and Records.
Nuveen Advisory Corp., 333 West Wacker Drive, Chicago, Illinois 60606, main-
tains the Declaration of Trust, By-Laws, minutes of trustees and shareholder
meetings and contracts of the Registrant and all advisory material of the in-
vestment adviser.
The Chase Manhattan Bank, 4 New York Plaza, New York, New York 10004 main-
tains all general and subsidiary ledgers, journals, trial balances, records of
all portfolio purchases and sales, and all other records not maintained by
Nuveen Advisory Corp., Shareholder Services, Inc. or Boston Financial.
Chase Global Funds Service Company, 73 Tremont Street, Boston, Massachusetts,
mainains all the required records in its capacity as transfer, dividend paying
and shareholder service agent for the Fund.
Item 29. Management Services:
Not applicable.
Item 30. Undertakings:
Not applicable.
VI
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, as amended, the Registrant has duly caused this
Registration Statement to be signed on its behalf by the undersigned, duly
authorized, in the City of Chicago, and State of Illinois, on the 1st day of
June, 1999.
NUVEEN MONEY MARKET TRUST
/s/ Gifford R. Zimmerman
-----------------------------------------
Gifford R. Zimmerman, Vice President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<C> <C> <S>
/s/ Stephen D. Foy Vice President and June 1, 1999
------------------------------- Controller (Principal
Stephen D. Foy Financial and
Accounting Officer)
Timothy R. Schwertfeger Chairman of the Board
and Trustee (Principal
Executive Officer)
Robert P. Bremner Trustee
Lawrence H. Brown Trustee
Anne E. Impellizzeri Trustee
Peter R. Sawers Trustee
William J. Schneider Trustee
Judith M. Stockdale Trustee
</TABLE>
/s/ Gifford R. Zimmerman
By____________________________
Gifford R. Zimmerman
Attorney-in-Fact
June 1, 1999
An original power of attorney authorizing, among others, Gifford R. Zimmerman
and Larry W. Martin to execute this Registration Statement, and Amendments
thereto, for each of the trustees of the Registrant on whose behalf this
Registration Statement is filed herewith.
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Name Exhibit
- ---- -------
<S> <C>
Powers of Attorney...................................................... Ex-99.P
</TABLE>
<PAGE>
NUVEEN MONEY MARKET TRUST
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a trustee of the above-
referenced organization, hereby constitutes and appoints ANTHONY T. DEAN, ALAN
G. BERKSHIRE, LARRY W. MARTIN and GIFFORD R. ZIMMERMAN, and each of them (with
full power to each of them to act alone) his true and lawful attorney-in-fact
and agent, for him on his behalf and in his name, place and stead, in any and
all capacities, to sign and file one or more Registration Statements on Form
N-1A under the Securities Act of 1933 and the Investment Company Act of 1940,
including any amendment or amendments thereto, with all exhibits, and any and
all other documents required to be filed with any regulatory authority, federal
or state, relating to the registration thereof, or the issuance of shares
thereof, without limitation, granting unto said attorneys, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises in order to
effectuate the same as fully to all intents and purposes as he might or could do
if personally present, hereby ratifying and confirming all that said attorneys-
in-fact and agents, or any of them, may lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned trustee of the above-referenced organization
has hereunto set his hand this 1st day of February, 1999.
/s/ Timothy R. Schwertfeger
---------------------------
Timothy R. Schwertfeger
STATE OF ILLINOIS )
----------------
)SS
COUNTY OF COOK )
--------------
On this 1st day of February, 1999, personally appeared before me, a Notary
Public in and for said County and State, the person named above who is known to
me to be the person whose name and signature is affixed to the foregoing Power
of Attorney and who acknowledged the same to be his voluntary act and deed for
the intent and purposes therein set forth.
"OFFICIAL SEAL"
Virginia L. Corcoran /s/ Virginia L. Corcoran
Notary Public, State of Illinois -----------------------
My Commission Expires: 10/27/01 Notary Public
<PAGE>
NUVEEN MONEY MARKET TRUST
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a trustee of the above-
referenced organization, hereby constitutes and appoints TIMOTHY R.
SCHWERTFEGER, ANTHONY T. DEAN, ALAN G. BERKSHIRE, LARRY W. MARTIN and GIFFORD R.
ZIMMERMAN, and each of them (with full power to each of them to act alone) his
true and lawful attorney-in-fact and agent, for him on his behalf and in his
name, place and stead, in any and all capacities, to sign and file one or more
Registration Statements on Form N-1A under the Securities Act of l933 and the
Investment Company Act of l940, including any amendment or amendments thereto,
with all exhibits, and any and all other documents required to be filed with any
regulatory authority, federal or state, relating to the registration thereof, or
the issuance of shares thereof, without limitation, granting unto said
attorneys, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises
in order to effectuate the same as fully to all intents and purposes as he might
or could do if personally present, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned trustee of the above-referenced organization
has hereunto set his hand this 1st day of February, 1999.
/s/ Robert P. Bremner
---------------------
Robert P. Bremner
STATE OF ILLINOIS )
----------------
)SS
COUNTY OF COOK )
--------------
On this 1st day of February, 1999, personally appeared before me, a Notary
Public in and for said County and State, the person named above who is known to
me to be the person whose name and signature is affixed to the foregoing Power
of Attorney and who acknowledged the same to be his voluntary act and deed for
the intent and purposes therein set forth.
"OFFICIAL SEAL"
Virginia L. Corcoran /s/Virginia L. Corcoran
-----------------------
Notary Public, State of Illinois Notary Public
My Commission Expires: 10/27/01
<PAGE>
NUVEEN MONEY MARKET TRUST
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a trustee of the above-
referenced organization, hereby constitutes and appoints TIMOTHY R.
SCHWERTFEGER, ANTHONY T. DEAN, ALAN G. BERKSHIRE, LARRY W. MARTIN and GIFFORD R.
ZIMMERMAN, and each of them (with full power to each of them to act alone) his
true and lawful attorney-in-fact and agent, for him on his behalf and in his
name, place and stead, in any and all capacities, to sign and file one or more
Registration Statements on Form N-1A under the Securities Act of 1933 and the
Investment Company Act of l940, including any amendment or amendments thereto,
with all exhibits, and any and all other documents required to be filed with any
regulatory authority, federal or state, relating to the registration thereof, or
the issuance of shares thereof, without limitation, granting unto said
attorneys, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises
in order to effectuate the same as fully to all intents and purposes as he might
or could do if personally present, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned trustee of the above-referenced organization
has hereunto set his hand this 1st day of February, 1999.
/s/ Lawrence H. Brown
---------------------
Lawrence H. Brown
STATE OF ILLINOIS )
----------------
)SS
COUNTY OF COOK
-------------- )
On this 1st day of February, 1999, personally appeared before me, a Notary
Public in and for said County and State, the person named above who is known to
me to be the person whose name and signature is affixed to the foregoing Power
of Attorney and who acknowledged the same to be his voluntary act and deed for
the intent and purposes therein set forth.
"OFFICIAL SEAL"
Virginia L. Corcoran /s/ Virginia L. Corcoran
Notary Public, State of Illinois ------------------------
My Commission Expires: 10/27/01 Notary Public
<PAGE>
NUVEEN MONEY MARKET TRUST
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a trustee of the above-
referenced organization, hereby constitutes and appoints TIMOTHY R.
SCHWERTFEGER, ANTHONY T. DEAN, ALAN G. BERKSHIRE, LARRY W. MARTIN and GIFFORD R.
ZIMMERMAN, and each of them (with full power to each of them to act alone) her
true and lawful attorney-in-fact and agent, for her on her behalf and in her
name, place and stead, in any and all capacities, to sign and file one or more
Registration Statements on Form N-1A under the Securities Act of l933 and the
Investment Company Act of l940, including any amendment or amendments thereto,
with all exhibits, and any and all other documents required to be filed with any
regulatory authority, federal or state, relating to the registration thereof, or
the issuance of shares thereof, without limitation, granting unto said
attorneys, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises
in order to effectuate the same as fully to all intents and purposes as he might
or could do if personally present, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned trustee of the above-referenced organization
has hereunto set her hand this 1st day of February, 1999.
/s/ Anne E. Impellizzeri
------------------------
Anne E. Impellizzeri
STATE OF ILLINOIS )
----------------
)SS
COUNTY OF COOK )
--------------
On this 1st day of February, 1999, personally appeared before me, a Notary
Public in and for said County and State, the person named above who is known to
me to be the person whose name and signature is affixed to the foregoing Power
of Attorney and who acknowledged the same to be his voluntary act and deed for
the intent and purposes therein set forth.
"OFFICIAL SEAL"
Virginia L. Corcoran /s/ Virginia L. Corcoran
------------------------
Notary Public, State of Illinois Notary Public
My Commission Expires: 10/27/01
<PAGE>
NUVEEN MONEY MARKET TRUST
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a trustee of the above-
referenced organization, hereby constitutes and appoints TIMOTHY R.
SCHWERTFEGER, ANTHONY T. DEAN, ALAN G. BERKSHIRE, LARRY W. MARTIN and GIFFORD R.
ZIMMERMAN, and each of them (with full power to each of them to act alone) his
true and lawful attorney-in-fact and agent, for him on his behalf and in his
name, place and stead, in any and all capacities, to sign and file one or more
Registration Statements on Form N-1A under the Securities Act of l933 and the
Investment Company Act of l940, including any amendment or amendments thereto,
with all exhibits, and any and all other documents required to be filed with any
regulatory authority, federal or state, relating to the registration thereof, or
the issuance of shares thereof, without limitation, granting unto said
attorneys, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises
in order to effectuate the same as fully to all intents and purposes as he might
or could do if personally present, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned trustee of the above-referenced organization
has hereunto set his hand this 1st day of February, 1999.
/s/ Peter R. Sawers
-------------------
Peter R. Sawers
STATE OF ILLINOIS )
----------------
)SS
COUNTY OF COOK )
--------------
On this 1st day of February, 1999, personally appeared before me, a Notary
Public in and for said County and State, the person named above who is known to
me to be the person whose name and signature is affixed to the foregoing Power
of Attorney and who acknowledged the same to be his voluntary act and deed for
the intent and purposes therein set forth.
"OFFICIAL SEAL"
Virginia L. Corcoran /s/ Virginia L. Corcoran
------------------------
Notary Public, State of Illinois Notary Public
My Commission Expires: 10/27/01
<PAGE>
NUVEEN MONEY MARKET TRUST
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a trustee of the above-
referenced organization, hereby constitutes and appoints TIMOTHY R.
SCHWERTFEGER, ANTHONY T. DEAN, ALAN G. BERKSHIRE, LARRY W. MARTIN and GIFFORD R.
ZIMMERMAN, and each of them (with full power to each of them to act alone) his
true and lawful attorney-in-fact and agent, for him on his behalf and in his
name, place and stead, in any and all capacities, to sign and file one or more
Registration Statements on Form N-1A under the Securities Act of 1933 and the
Investment Company Act of 1940, including any amendment or amendments thereto,
with all exhibits, and any and all other documents required to be filed with any
regulatory authority, federal or state, relating to the registration thereof, or
the issuance of shares thereof, without limitation, granting unto said
attorneys, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises
in order to effectuate the same as fully to all intents and purposes as he might
or could do if personally present, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned trustee of the above-referenced organization
has hereunto set his hand this 1st day of February, 1999.
/s/ William J. Schneider
------------------------
William J. Schneider
STATE OF ILLINOIS )
---------------
)SS
COUNTY OF COOK )
---------------
On this 1st day of February, 1999, personally appeared before me, a Notary
Public in and for said County and State, the person named above who is known to
me to be the person whose name and signature is affixed to the foregoing Power
of Attorney and who acknowledged the same to be his voluntary act and deed for
the intent and purposes therein set forth.
"OFFICIAL SEAL"
Virginia L. Corcoran /s/ Virginia L. Corcoran
Notary Public, State of Illinois ------------------------
My Commission Expires: 10/27/01 Notary Public
<PAGE>
NUVEEN MONEY MARKET TRUST
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a trustee of the above-
referenced organization, hereby constitutes and appoints TIMOTHY R.
SCHWERTFEGER, ANTHONY T. DEAN, ALAN G. BERKSHIRE, LARRY W. MARTIN and GIFFORD R.
ZIMMERMAN, and each of them (with full power to each of them to act alone) her
true and lawful attorney-in-fact and agent, for her on her behalf and in her
name, place and stead, in any and all capacities, to sign and file one or more
Registration Statements on Form N-1A under the Securities Act of 1933 and the
Investment Company Act of 1940, including any amendment or amendments thereto,
with all exhibits, and any and all other documents required to be filed with any
regulatory authority, federal or state, relating to the registration thereof, or
the issuance of shares thereof, without limitation, granting unto said
attorneys, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises
in order to effectuate the same as fully to all intents and purposes as he might
or could do if personally present, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned trustee of the above-referenced organization
has hereunto set her hand this 1st day of February, 1999.
/s/ Judith M. Stockdale
-----------------------
Judith M. Stockdale
STATE OF ILLINOIS )
----------------
)SS
COUNTY OF COOK )
--------------
On this 1st day of February, 1999, personally appeared before me, a Notary
Public in and for said County and State, the person named above who is known to
me to be the person whose name and signature is affixed to the foregoing Power
of Attorney and who acknowledged the same to be his voluntary act and deed for
the intent and purposes therein set forth.
"OFFICIAL SEAL"
Virginia L. Corcoran /s/ Virginia L. Corcoran
Notary Public, State of Illinois ------------------------
My Commission Expires: 10/27/01 Notary Public
