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NUVEEN LOGO
June 7, 1999
DEAR NUVEEN MONEY MARKET FUND SHAREHOLDER:
On June 4, 1999, the Nuveen Tax-Exempt Money Market Fund, Inc., Nuveen Tax-Free
Reserves, Inc. and Nuveen California Tax-Free Money Market Fund held a special
shareholder meeting to approve changes to the organization and operation of the
fund. We adjourned the meeting until June 22, 1999 for certain proposals because
we did not receive enough votes to approve these proposals. The adjournment will
give us more time to solicit the necessary votes to pass the proposals.
YOUR VOTE MAKES A DIFFERENCE. THE FUND INCURS ADDED COSTS TO MAIL PROXIES AGAIN
WHEN NOT ENOUGH SHAREHOLDERS VOTE. THE PROPOSALS ARE EXPECTED TO ENABLE THE FUND
TO OPERATE MORE EFFICIENTLY AND ENHANCE ITS ABILITY TO MEET ITS OBJECTIVES. THE
FUND'S BOARD OF DIRECTORS HAS APPROVED THE PROPOSALS AND UNANIMOUSLY RECOMMENDS
YOU VOTE IN FAVOR OF THEM.
We have enclosed a brief recap of the most commonly asked questions about the
proposals to help you make an informed decision. PLEASE TAKE A MOMENT TO REVIEW
THE PROXY MATERIALS AND THEN RETURN YOUR SIGNED PROXY CARD IN THE PREPAID
ENVELOPE. You may receive a follow up phone call to verify receipt of the
materials and to help you answer any questions.
Thank you for your continued confidence in Nuveen and our family of Investments.
If you have any questions, please call Nuveen at (800) 257-8787.
Sincerely,
/s/ Tim Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
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IMPORTANT INFORMATION FOR
NUVEEN MONEY MARKET FUND SHAREHOLDERS
The following is a brief overview of the proposals to be voted upon at the June
4, 1999 shareholder meeting. It should be read in conjunction with your fund's
proxy statement, which was mailed to you earlier. If you would like another copy
of the proxy statement, please call us at the number listed below.
YOUR VOTE IS VERY IMPORTANT.
If you have not already done so, please fill out and return the enclosed proxy
card in a timely fashion. Thank you for your support of the Nuveen family of
mutual funds.
Q. WHY IS MY FUND CALLING A SPECIAL SHAREHOLDER MEETING?
A. Your fund has called this meeting to obtain your approval for some important
changes related to how the fund operates. These changes are part of Nuveen's
ongoing efforts to enhance the attractiveness and competitiveness of its
mutual funds by streamlining and standardizing with common industry practice
key aspects of the funds, including investment management, compliance and
administrative functions, service fees and corporate structure.
Q. WHAT SPECIFIC CHANGES ARE YOU PROPOSING?
A. We are asking you to (i) approve a new investment management agreement and
(except for the Tax-Exempt Money Market Fund) a new Rule 12b-1 Plan; (ii)
approve amendments to each fund's investment objective and policies; and
(iii) approve the reorganization of each fund into a separate series of a
newly-created Massachusetts business trust. We're also asking you to take
action on two administrative matters: the election to new terms of the seven
directors who currently serve on your fund's Board, and the ratification of
Arthur Andersen as your fund's independent auditor.
Q. HOW WILL THESE CHANGES AFFECT ME?
A. The proposed changes will not affect the day-to-day management of your fund's
portfolio or its investment strategies. These changes are designed to enable
your fund to operate more efficiently by streamlining and standardizing key
aspects of your fund's operation and to conform your fund's fee and expense
levels to industry norms. While several of the changes over time may increase
fund net operating expenses, on balance we believe the changes overall will
help make the fund more attractive to investors and their financial advisers,
increase operating efficiency, and enhance your fund's ability to continue to
offer competitive returns over time.
Q. HOW DO THE NEW AND OLD INVESTMENT MANAGEMENT AGREEMENTS DIFFER?
A. There are two differences between the old and new agreements. First, the new
agreement has a management fee schedule with more fee breakpoints. This means
that the management fees your fund pays will decline more quickly than before
as fund assets grow. Second, the new agreement replaces your fund's current
contractual expense cap with a market-based, discretionary expense cap. This
means that Nuveen will no longer reimburse fund expenses to a
contractually-stipulated level. Instead, Nuveen would be able to use its
discretion when setting reimbursement levels, taking into account such market
factors as a fund's expense ratio relative to its peers and its ability to
offer shareholders competitive returns. As a result, fund net operating
expenses will not increase precipitously if the new agreement is approved. We
believe a market-based expense cap policy provides your fund's adviser
greater flexibility than a contractually-stipulated policy in responding to
market and competitive conditions. If approved, this change initially will
have no impact on fund expenses, because Nuveen will maintain fund net
operating expenses at their current levels at least through December 31,
1999.
Q. HOW ARE YOU CHANGING MY FUND'S INVESTMENT OBJECTIVES AND POLICIES?
A. We are seeking your approval to change the wording but not the substance of
your fund's investment objective; this will have no impact on your fund's
day-to-day portfolio management. We're doing this in order to simplify the
administration of our money market funds by adopting a standardized
formulation of the fund's investment objective.
We're also seeking your approval to eliminate two outdated investment
policies that were originally adopted to comply with now obsolete state
securities laws. The first seeks to limit investment risk by restricting the
fund's ability to invest in securities of "unseasoned" companies with limited
or no long-term track record in business. As a tax-exempt money market fund,
your fund does not invest in companies. Rather, it invests in bonds issued by
state and local governments and government authorities. For this reason, this
policy has not been relevant to your fund's investment strategy and its
elimination would have no impact on your fund's operation. The second seeks
to prevent conflicts of interest by restricting the fund's ability to invest
in securities which fund officers also own. We believe your fund's Code of
Ethics,
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which restricts the investment activities of fund management personnel and
was adopted pursuant to SEC rules, is sufficient to prevent potential
conflicts of interest.
Q. HOW DO THE NEW AND OLD SERVICE PLANS DIFFER?
A. Currently, service fees (under Rule 12b-1 and non-Rule 12b-1 Plans) are borne
equally by the fund and Nuveen. However, it is standard industry practice for
funds to pay for various services that shareholders receive, either
indirectly through the fund, such as custodian or transfer agency fees, or
directly from authorized dealers, such as 12b-1 service fees. Under the new
Plan, the fund will have full responsibility for paying 12b-1 service fees to
authorized dealers who provide ongoing account service and maintenance to
fund shareholders. While this will increase modestly the fund's gross (before
reimbursements) operating expenses, we believe this is an appropriate expense
for the fund to bear in full. For the Nuveen Tax-Free Reserves Fund, the new
Plan also reduces the maximum service fee paid to authorized dealers from
0.30% to 0.25% in order to conform with NASD limits on such fees.
Note: Nuveen Tax-Exempt Money Market Fund is for institutional investors and
does not and will not have a Rule 12b-1 Plan.
Q. WHAT HAPPENS IF EACH SHARE CLASS OF THE NEW YORK AND CALIFORNIA MONEY MARKET
FUNDS APPROVES THE NEW 12B-1 PLAN?
A. At the same time the new 12b-1 Plan is implemented, Nuveen will also
consolidate the existing three share classes of each fund into a single share
class. The original reasons behind each fund's creation of three different
share classes are no longer relevant. By consolidating share classes, we
expect to be able to operate each fund more efficiently.
Q. WHAT ARE THE BENEFITS OF REORGANIZING MY FUND INTO A MASSACHUSETTS BUSINESS
TRUST?
A. Currently, your fund is organized as either a Minnesota or a Maryland
corporation. Reorganization of your fund into a series of a newly-created
Massachusetts business trust is an administrative change that by itself will
not change your fund's investment objective, policies or operations. By
organizing your fund the same way as all other Nuveen mutual funds, we expect
to be able to operate your fund more efficiently at lower cost.
Q. HAS THE FUNDS' BOARD OF DIRECTORS APPROVED THE PROPOSALS?
A. Yes. The directors of your fund have unanimously agreed that these proposals
are in your best interests and recommends that you vote "FOR" each proposal.
Q. ARE YOU PLANNING ANY ADDITIONAL CHANGES TO THE FUNDS?
A. Yes. We plan to make several additional changes, which do not require prior
shareholder approval, at the same time we implement the proposals described
in this booklet, if approved by shareholders. We plan on changing the name of
Nuveen Tax-Free Reserves to Nuveen Municipal Money Market Fund; changing the
name of Nuveen California Tax-Free Money Market Fund to Nuveen California
Tax-Exempt Money Market Fund; changing the name of Nuveen New York Tax-Free
Money Market Fund to Nuveen New York Tax-Exempt Money Market Fund, and
changing the name of Nuveen Tax-Exempt Money Market Fund to Nuveen
Institutional Tax-Exempt Money Market Fund. We also plan to begin investing
in AMT bonds, whose income is subject to the federal alternative minimum tax,
for all our municipal money market funds except the Nuveen Institutional
Tax-Exempt Money Market Fund. These funds are already permitted to do so, but
have not taken advantage before of the opportunity AMT bonds provide to earn
higher yields. Nuveen Municipal Money Market Fund will be able to invest
without limit in AMT bonds, while our California and New York Tax-Exempt
Money Market Funds will invest up to 20% of their respective net assets in
AMT bonds.
Q. WHO PAYS THE COSTS OF THE SHAREHOLDER MEETING?
A. Each fund will pay a pro-rata portion of the costs of the meeting, including
all costs related to printing, mailing and tabulation of proxies. These are
estimated to be $0.0004 per share. By voting immediately, you can help your
fund avoid the considerable expense of a second proxy solicitation.
Q. DO I NEED TO VOTE?
A. We encourage you to participate in the governance of your fund; your vote
makes a difference. If enough shareholders do not vote, your fund may not
receive enough votes to proceed with the meeting. If this happens, we'll have
to mail proxy materials again, which raises the costs of the meeting for all
shareholders.
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Q. HOW DO I VOTE?
A. You may vote in person, by mail, by telephone or over the Internet. To vote
in person, you may attend the special meeting of shareholders which will be
held in the 31st floor conference room of John Nuveen & Co. Incorporated
located at 333 West Wacker Drive, Chicago, Illinois on Friday, June 4, 1999.
To vote by mail, please mark, sign and date the enclosed proxy card(s), and
mail it in the enclosed reply envelope, allowing sufficient time for your
proxy to be received on or before Friday, June 4, 1999. No postage is
required if the proxy is mailed in the United States. To vote by telephone,
call the number indicated on your proxy card, enter the 12-digit control
number found in the right portion of your proxy card, and follow the recorded
instructions, using your proxy card as a guide. To vote over the Internet, go
to www.proxyvote.com, enter the 12-digit control number found on the right
portion of your proxy card, and follow the instructions, using your proxy
card as a guide.
Q. WHOM DO I CALL IF I HAVE QUESTIONS?
A. If you need assistance, or have any questions regarding our proposals or how
to vote, please call your financial adviser. We would also be happy to answer
your questions; you may call us at (800) 257-8787 weekdays between 7:00 a.m.
and 7:00 p.m., Central time.
