<PAGE>
As filed with the Securities and Exchange Commission on June 27, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
[_]
File No. 2-78736
Pre-Effective Amendment No.--- [_]
Post-Effective Amendment No. 15
--- [X]^
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
[_]
File No. 811-3531
Amendment No. 16
--- [X]^
NUVEEN TAX-FREE RESERVES, INC.
(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
James J. Wesolowski, Esq.--Vice President and Secretary
333 West Wacker Drive
Chicago, Illinois 60606
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box):
Immediately upon filing pursuant to paragraph (b)
on (date) pursuant to paragraph
[_] [_] (a)(1)
on July 1, 1996 pursuant to paragraph (b)
[X] 75 days after filing pursuant to par-
[_] agraph (a)(2)
60 days after filing pursuant to paragraph (a)(1)
[_] on (date) pursuant to paragraph
[_] (a)(2) of Rule 485.
If appropriate, check the following box:
If appropriate, check the following box:
This post-effective amendment designates a new effective date for a previ-
ously filed post-effective amendment.
[_]This post-effective amendment designates a new effective date for a previ-
[_]ously filed post-effective amendment.
PURSUANT TO RULE 24F-2 OF THE INVESTMENT COMPANY ACT OF 1940, REGISTRANT HAS
ELECTED TO REGISTER AN INDEFINITE NUMBER OF SHARES. A RULE 24F-2 NOTICE FOR THE
REGISTRANT'S FISCAL YEAR ENDED FEBRUARY 29, 1996, WAS FILED ON OR ABOUT APRIL
22, 1996.
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF SECURITIES BEING OFFERING PRICE AGGREGATE REGISTRATION
BEING REGISTERED REGISTERED PER UNIT OFFERING PRICE FEE*
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares of Common Stock, $.01 par value.. 111,953,871 $1.00 $111,953,871 $100.00
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
*Registrant has elected to calculate its filing fee in the manner described in
Rule 24e-2 under the Investment Company Act of 1940. The total amount of secu-
rities redeemed during the previous fiscal year was $830,960,291. The total
amount of redeemed securities used for reduction pursuant to Rule 24e-2(a) or
Rule 24f-2(c) was $719,296,420. The amount of redeemed securities being used
for reduction of the registration fee in this Amendment is $111,663,871.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
NUVEEN TAX-FREE RESERVES, INC.
CONTENTS
OF
POST-EFFECTIVE AMENDMENT NO. 15
TO
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
FILE NO. 2-78736
AND
AMENDMENT NO. 16
TO
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
FILE NO. 811-3531
This Registration Statement comprises the following papers and contents:
The Facing Sheet
Table of Contents
Cross-Reference Sheet
Part A--The Prospectus
Part B--The Statement of Additional Information
Copy of Annual Report to Shareholders (the financial
statements from which are incorporated by reference into the
Statement of Additional Information)
Part C--Other Information
Signatures
Index to Exhibits
Exhibits
<PAGE>
NUVEEN TAX-FREE RESERVES, INC.
-----------------
CROSS REFERENCE SHEET
PART A--PROSPECTUS
<TABLE>
<CAPTION>
ITEM IN
PART A
OF FORM N-
1A PROSPECTUS LOCATION
---------- -------------------
<C> <S>
1 Cover Page
2(a) Fund Expenses
(b) Highlights
(c) Highlights
3(a) Financial Highlights
(b) Not applicable
(c) Yield
(d) Not applicable
4(a) General Information--Capital Stock; The Fund and Its Investment Objective;
Investment Policies
(b) Investment Policies
(c) Investment Policies
5(a) Management of the Fund
(b) Management of the Fund
(c) Not applicable
(d) General Information--Custodian, Shareholder Services Agent and Transfer
Agent; Management of the Fund
(e) General Information--Custodian, Shareholder Services Agent and Transfer
Agent
(f) Not applicable
(g) Not applicable
5A Not applicable
6(a) General Information--Capital Stock
(b) Not applicable
(c) Not applicable
(d) Not applicable
(e) General Information--Investor Inquiries
(f) Dividends and Taxes
(g) Dividends and Taxes--Tax Matters
(h) Not applicable
7(a) Management of the Fund
(b) Net Asset Value; How to Buy Fund Shares
(c) How to Buy Fund Shares
(d) How to Buy Fund Shares
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ITEM IN
PART A
OF FORM N-
1A PROSPECTUS LOCATION
---------- -------------------
<C> <S>
(e) How to Buy Fund Shares--Distribution and Service Plan
(f) How to Buy Fund Shares--Distribution and Service Plan
8(a) How to Redeem Fund Shares
(b) How to Redeem Fund Shares--Regular Redemption Procedure
(c) Not applicable
(d) How to Redeem Fund Shares
9 Not applicable
</TABLE>
<PAGE>
PART B--STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
ITEM IN
PART B
OF FORM N- LOCATION IN STATEMENT
1A OF ADDITIONAL INFORMATION
---------- -------------------------
<C> <S>
10 Cover Page
11 Cover Page
12 Not applicable
13 Fundamental Policies and Investment Portfolio
14(a) Management
(b) Management
(c) Management
15(a) Not applicable
(b) Not applicable
(c) Management
16(a) Investment Adviser and Investment Management Agreement; Management
(b) Investment Adviser and Investment Management Agreement; see also
"Management of the Fund" in the Prospectus
(c) Not applicable
(d) Not applicable
(e) Not applicable
(f) Distribution and Service Agreements, see also "How to Buy Fund Shares--
Distribution and Service Plan" in the Prospectus
(g) Not applicable
(h) Independent Public Accountants and Custodian
(i) Not applicable
17(a) Portfolio Transactions
(b) Not applicable
(c) Portfolio Transactions
(d) Not applicable
(e) Not applicable
18(a) See "How to Redeem Fund Shares" and "General Information--Capital Stock" in
the Prospectus
(b) Not applicable
19(a) See "How to Buy Fund Shares" in the Prospectus
(b) Net Asset Value; Financial Statements--Statement of Net Assets; see also
"Net Asset Value" in the Prospectus
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ITEM IN
PART B
OF FORM N- LOCATION IN STATEMENT
1A OF ADDITIONAL INFORMATION
- ---------- -------------------------
<S> <C>
(c) See "How to Redeem Fund Shares--Redemption in Kind" in the Prospectus
20 Tax Matters
21(a) Distribution and Service Plan; see also "How to Buy Fund Shares" in the
Prospectus
(b) Not applicable
(c) Not applicable
22(a) Yield Information
(b) Not applicable
23 Incorporated by reference to Annual Report
</TABLE>
<PAGE>
PART A--PROSPECTUS
NUVEEN TAX-FREE RESERVES, INC.
333 West Wacker Drive
Chicago, Illinois 60606
<PAGE>
NUVEEN [LOGO]
Nuveen Tax-Free [PHOTO]
Money Market Funds
Dependable tax-free
income for generations
Tax-Free Reserves
PROSPECTUS/JULY 1, 1996
<PAGE>
NUVEEN TAX-FREE RESERVES, INC. PROSPECTUS
Prospectus
July 1, 1996
NUVEEN TAX-FREE RESERVES, INC.
Nuveen Tax-Free Reserves, Inc. (the "Fund") is an open-end, diversified
management investment company with the objective of providing through
investment in a professionally managed portfolio of high quality, short-term
Municipal Obligations as high a level of current interest income exempt from
federal income tax as is consistent, in the view of Fund management, with
stability of principal and the maintenance of liquidity. The Fund will value
its portfolio securities at amortized cost and seek to maintain a net asset
value of $1.00 per share. There are no sales or redemption charges. The minimum
initial investment is $1,000. The Fund is designed as a vehicle for direct
investment of temporary cash balances in tax-exempt money market instruments.
This Prospectus, which should be retained for future reference, sets forth
concisely the information about the Fund that a prospective investor ought to
know before investing. A "Statement of Additional Information" dated July 1,
1996, containing further information about the Fund has been filed with the
Securities and Exchange Commission, is incorporated by reference into this
Prospectus, and may be obtained without charge from John Nuveen & Co.
Incorporated by calling 800.621.7227.
An investment in the Fund is neither insured nor guaranteed by the U.S.
Government and there can be no assurance that the Fund will be able to maintain
a stable net asset value of $1.00 per share.
Shares of the Fund are not deposits or obligations of, or guaranteed or
endorsed by, any bank and are not federally insured by the Federal Deposit
Insurance Corporation, the Federal Reserve Board or any other agency.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
John Nuveen & Co. Incorporated
For information, call toll-free 800.621.7227
<PAGE>
CONTENTS
3
Summary of Fund expenses
4
Highlights
6
8 Financial highlights
9 Yield
The Fund and its investment
objective and policies
15
Management of the Fund
17
Dividends and taxes
20
21 Net asset value
How to buy Fund shares
27
How to redeem Fund shares
32
General information
33
Taxable equivalent yield tables
<PAGE>
SUMMARY OF FUND EXPENSES NUVEEN TAX-FREE RESERVES, INC. PROSPECTUS
The following tables illustrate all expenses and fees that a
shareholder of the Fund will incur. The expenses and fees
shown are for the fiscal year ended February 29, 1996.
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
- --------------------------------------------------
<S> <C>
Sales charges imposed on purchases None
Sales charges imposed on reinvested
dividends None
Redemption fees None
Exchange fees None
</TABLE>
<TABLE>
<CAPTION>
ANNUAL OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE DAILY
NET ASSETS)
- ------------------------------------------------------
<S> <C>
Management fees .50%
12b-1 fees .04%
Other operating expenses, after expense
reimbursements .21%
-----
Total expenses, after expense
reimbursements .75%
-----
-----
</TABLE>
The purpose of the foregoing tables is to assist you in
understanding all expenses and fees that you would bear
directly or indirectly as an investor in the Fund.
As discussed under "Management of the Fund" and reflected in
the tables above, the management fee is reduced or Nuveen
Advisory assumes certain expenses so as to prevent the total
expenses of the Fund in any fiscal year from exceeding .75 of
1% of average daily net assets. Without expense
reimbursements, for the fiscal year ended February 29, 1996,
other operating expenses would have been .25 of 1% of the
average daily net assets, and total expenses would have been
.79 of 1% of the average daily net assets. See "Management of
the Fund."
3
<PAGE>
HIGHLIGHTS
The following example illustrates the expenses that you would
pay on a $1,000 investment over various time periods assuming
(1) a 5% annual rate of return and (2) redemption at the end
of each time period. As noted in the table above, the Fund
charges no redemption fees of any kind.
<TABLE>
<CAPTION>
10
1 YEAR 3 YEARS 5 YEARS YEARS
--------------------------------------------------------------
<S> <C> <C> <C>
$8 $24 $42 $93
</TABLE>
This example should not be considered a representation of
past or future expenses or performance. Actual expenses may
be greater or less than those shown. This example assumes
that the percentage amounts listed under Annual Operating
Expenses remains the same in each of the periods.
Nuveen Tax-Free Reserves, Inc. (the "Fund") is an open-end,
diversified management investment company with the objective
of providing, through investment in a professionally managed
portfolio of high quality short-term Municipal Obligations,
as high a level of current interest income exempt from fed-
eral income tax as is consistent, in the view of the Fund's
management, with stability of principal and the maintenance
of liquidity. The Fund will value its portfolio at amortized
costand seek to maintain a net asset value of $1.00 per
share. There is no guarantee that this value will be main-
tained. See "Net Asset Value" on page 20 and "The Fund and
Its Investment Objective and Policies" on page 9.
The Fund intends to qualify, as it has in prior years, for
tax treatment as a regulated investment company and to
satisfy conditions that will enable interest income which is
exempt from federal income tax in the hands of the Fund to
retain such tax-exempt status when distributed to the
shareholders of the Fund. Distributions may not be exempt
from state or local income taxes. See "Dividends and Taxes"
on page 17.
HOW TO BUY FUND SHARES
Fund shares may be purchased on days on which the Federal
Reserve Bank of Boston is normally open for business
("business days") at the net asset value next determined
after an order is received together with payment in federal
funds. The minimum initial investment is $1,000. Subsequent
investments for the account of the shareholder must be in
amounts of $100 or more. See "How to Buy Fund Shares" on page
21. For further information about the Fund or for assistance
in opening an account, please call Nuveen toll-free at
800.621.7227.
4
<PAGE>
NUVEEN TAX-FREE RESERVES, INC. PROSPECTUS
HOW TO REDEEM FUND SHARES
Shareholders may redeem shares at net asset value next
computed after receipt of a redemption request in proper form
on any business day. There is no redemption fee. See "How to
Redeem Fund Shares" on page 27.
DIVIDENDS AND REINVESTMENT
The Fund will declare dividends daily from its accumulated
net income and distribute the dividends monthly in the form
of additional shares or, at the option of the investor, in
cash. See "Dividends and Taxes" on page 17.
INVESTMENT ADVISER AND PRINCIPAL UNDERWRITER
John Nuveen & Co. Incorporated ("Nuveen") acts as principal
underwriter of the Fund. The Fund has a Distribution and
Service Plan under which the Fund and Nuveen pay fees to
qualifying organizations for servicing shareholder accounts.
See "How to Buy Fund Shares--Distribution and Service Plan"
on page 25. Nuveen Advisory Corp. ("Nuveen Advisory"), a
wholly-owned subsidiary of Nuveen, is the Fund's investment
adviser and receives an annual management fee ranging from .5
of 1% of the first $500 million of average daily net assets
to .45 of 1% of average daily net assets over $1 billion. The
management fee will be reduced or Nuveen Advisory will assume
certain Fund expenses in an amount necessary to prevent the
Fund's total expenses (excluding interest, taxes, fees
incurred in acquiring and disposing of portfolio securities
and extraordinary expenses) in any fiscal year from exceeding
.75 of 1% of its average daily net asset value. See
"Management of the Fund" on page 15.
INVESTMENTS
The Fund invests primarily in municipal money market
instruments. The Fund may from time to time invest a portion
of its assets in debt obligations which are not rated, and
variable rate or floating rate obligations. Investors are
urged to read the descriptions of these investments and
practices set forth in this Prospectus. See "Investment
Policies" on page 9.
The information set forth above should be read in conjunction
with the detailed information set forth elsewhere in this
Prospectus.
5
<PAGE>
FINANCIAL HIGHLIGHTS
The following financial information has been derived
from the Fund's financial statements, which have been
audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report appearing in
the Fund's Annual Report, and should be read in
conjunction with the financial statements and related
notes appearing in the Annual Report.
Selected data for a share of Common Stock outstanding
throughout each period is as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income from investment operations Less distributions
--------------------------------------------------------------------------------
Net Net
asset realized and
value Net unrealized Dividends from Distributions
beginning investment gain (loss) from net investment from
of period income investments income capital gains
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
RESERVES
- ------------------------------------------------------------------------------------------------------------------
Year ended 2/29
1996 $1.000 $.032* $ -- $(.032) $ --
Year ended 2/28,
1995 1.000 .025* -- (.025) --
1994 1.000 .018* -- (.018) --
1993 1.000 .023 -- (.023) --
5 months ended 2/29/92 1.000 .015 -- (.015) --
Year ended 9/30,
1991 1.000 .046 -- (.046) --
1990 1.000 .055 -- (.055) --
1989 1.000 .057 -- (.057) --
Year ended 2/29
1988 1.000 .045 -- (.045) --
Year ended 2/28,
1987 1.000 .039 -- (.039) --
1986 1.000 .045* -- (.045) --
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
* Reflects the waiver of certain management fees and reimbursement of certain
other expenses by Nuveen Advisory. For additional information about Nuveen
Advisory's fee waivers and expense reimbursement, see Notes to Financial
Statements in the Annual Report.
+ Annualized.
6
<PAGE>
NUVEEN TAX-FREE RESERVES, INC. PROSPECTUS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratios/Supplemental data
--------------------------------------------------------------------------------------
Ratio of net Ratio of
Ratio of investment net investment
expenses to income Ratio of income to
average to average expenses average
Total return Net assets net assets net assets to average net net assets
Net asset value on net asset end of period before before assets after after
end of period value (in thousands) reimbursement reimbursement reimbursement* reimbursement*
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
$1.000 3.23% $339,662 .79% 3.18% .75% 3.22%
1.000 2.46 351,606 .78 2.40 .75 2.43
1.000 1.84 404,201 .80 1.78 .75 1.83
1.000 2.34 450,746 .74 2.35 .74 2.35
1.000 1.45 477,127 .75+ 3.48+ .75+ 3.48+
1.000 4.57 451,808 .72 4.56 .72 4.56
1.000 5.45 430,206 .73 5.45 .73 5.45
1.000 5.70 390,258 .72 5.69 .72 5.69
1.000 4.52 409,653 .73 4.52 .73 4.52
1.000 3.88 361,044 .73 3.85 .73 3.85
1.000 4.46 272,677 .80 4.34 .75 4.39
- -------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
YIELD
From time to time, the Fund may advertise its "yield,"
"effective yield" and "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 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. 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 investor 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. Additional information
concerning performance figures appears in the Statement of
Additional Information.
Based on the seven-day period ended February 29, 1996, the
yield, effective yield and taxable equivalent yield (using
the maximum federal income tax rate of 39.6%) for the Fund
were 2.75%, 2.79% and 4.55%, respectively.
This Prospectus may be in use for a full year and it can be
expected that during this period there will be material
fluctuations in yield from that quoted above. For information
as to current yields, please call Nuveen at 800.621.7227.
8
<PAGE>
THE FUND AND ITS INVESTMENT NUVEEN TAX-FREE RESERVES, INC. PROSPECTUS
OBJECTIVE AND POLICIES
INVESTMENT OBJECTIVE
The Fund is an open-end, diversified management investment
company which has the objective of providing, through
investment in a professionally managed portfolio of high
quality short-term Municipal Obligations (described below),
as high a level of current interest income exempt from
federal income tax as is consistent, in the view of the
Fund's management, with stability of principal and the
maintenance of liquidity. The Fund's investment objective is
a fundamental policy of the Fund and may not be changed
without the approval of the holders of a majority of the
shares. The Fund values its portfolio securities at amortized
cost and seeks to maintain a constant net asset value of
$1.00 per share. There is risk in all investments and,
therefore, there can be no assurance that the Fund's
objective will be achieved.
INVESTMENT POLICIES
The Fund's investment assets will consist primarily of short-
term Municipal Obligations which at the time of purchase are
eligible for purchase by money market funds under applicable
guidelines of the Securities and Exchange Commission ("SEC"),
and are: (1) bonds rated within the two highest long-term
grades by Moody's Investors Service, Inc. ("Moody's") (Aaa or
Aa) or by Standard & Poor's Corporation ("S&P") (AAA or AA),
or, in the case of municipal notes, rated MIG-1 or VMIG-1 by
Moody's or SP-1 by S&P, or, in the case of municipal
commercial paper, rated Prime-1 by Moody's or A-1 by S&P; (2)
unrated, but which, in the opinion of Nuveen Advisory, have
credit characteristics equivalent to obligations rated Aa,
MIG-1, VMIG-1 or Prime-1 by Moody's, or AA, SP-1 or A-1 by
S&P; and (3) tax-exempt project notes which at the time of
purchase are secured by the full faith and credit of the U.S.
Government as to payment of principal and interest. To the
extent that unrated Municipal Obligations may be less liquid,
there may be somewhat greater risks in purchasing unrated
Municipal Obligations than in purchasing comparable but rated
Municipal Obligations.
The investment portfolio of the Fund will be limited to
obligations that mature within 397 days from the date of
acquisition or that have variable or floating rates of
interest (which rates vary with changes in specified market
rates or indices such as a bank prime rate or tax-exempt
money market index). The Fund may invest in such variable and
floating rate instruments even if they carry stated
maturities in excess of 397 days, provided that (1) certain
conditions contained in rules and regulations issued by the
SEC under the Investment Company Act of 1940 are satisfied
and (2) they permit the Fund to recover the full principal
amount thereof upon specified notice. The Fund's right to
obtain payment at par on such an instrument could be
adversely affected by events occurring between the date the
Fund elects to tender the instrument and the date proceeds
are due.
9
<PAGE>
The types of short-term Municipal Obligations in which the
Fund may invest include bond anticipation notes, tax
anticipation notes, revenue anticipation notes, construction
loan notes issued to provide construction financing for
specific projects, and bank notes issued by governmental
authorities to commercial banks as evidence of borrowings.
Since these short-term securities frequently serve as interim
financing pending receipt of anticipated funds from the
issuance of long-term bonds, tax collections or other
anticipated future revenues, a weakness in an issuer's
ability to obtain such funds as anticipated could adversely
affect the issuer's ability to meet its obligations on these
short-term securities.
Because the Fund invests in securities backed by banks and
other financial institutions, changes in the credit quality
of these institutions could cause losses to the Fund and
affect its share price.
The Fund has obtained commitments (each, a "Commitment") from
MBIA Insurance Corporation ("MBIA") with respect to certain
designated bonds held by the Fund for which credit support is
furnished by one of the banks ("Approved Banks") approved by
MBIA under its established credit approval standards. Under
the terms of a Commitment, if the Fund were to determine that
certain adverse circumstances relating to the financial
condition of the Approved Bank had occurred, the Fund could
cause MBIA to issue a "while-in-fund" insurance policy
covering the underlying bonds; after time and subject to
further terms and conditions, the Fund could obtain from MBIA
an "insured-to-maturity" insurance policy as to the covered
bonds. Each type of insurance policy would insure payment of
interest on the bonds and payment of principal at maturity.
Although such insurance would not guarantee the market value
of the bonds or the value of the Fund's shares, the Fund
believes that its ability to obtain insurance for such bonds
under such adverse circumstances will enable the Fund to hold
or dispose of such bonds at a price at or near their par
value.
The Fund may purchase but to date has not purchased and has
no present intention to purchase "temporary investments," the
income from which is subject to federal income tax. Under
ordinary circumstances, the Fund may not invest more than 20%
of its net assets in such temporary investments. However,
during extraordinary circumstances the Fund may, for
defensive purposes, invest more than 20% of its assets in
such temporary investments. The Fund will invest only in
temporary investments with remaining maturities of 397 days
or less which, in the opinion of Nuveen Advisory, are of
"high grade" quality. The foregoing restrictions and other
limitations discussed herein will apply only at the time of
purchase of securities and will not be considered violated
unless an excess or deficiency occurs or exists immediately
after and as a result of an acquisition of securities.
10
<PAGE>
NUVEEN TAX-FREE RESERVES, INC. PROSPECTUS
Because investments of the Fund will consist of securities
with relatively short maturities, the Fund can expect to have
a high portfolio turnover rate. The Fund will maintain a
dollar-weighted average portfolio maturity of not more than
90 days. During the fiscal year ended February 29, 1996 the
average maturity of the Fund's portfolio ranged from 20 to 37
days.
MUNICIPAL OBLIGATIONS
Municipal Obligations include debt obligations issued by
states, 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 Municipal
Obligations 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 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 taxing power
of the issuer of such bonds. There are, of course, variations
in the security of Municipal Obligations, both within a
particular classification and between classifications,
depending on numerous factors.
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 revenues.
11
<PAGE>
Municipal Obligations also include very short-term unsecured,
negotiable promissory notes, issued by states,
municipalities, and their agencies, which are known as "tax-
exempt commercial paper" or "municipal paper." Payment of
principal 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 extent
consistent with its investment objective 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, including 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 opinions 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.
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 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
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.
Obligations of issuers of Municipal Obligations are subject
to the provisions of bankruptcy, insolvency and other laws
affecting the rights and remedies of creditors.
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NUVEEN TAX-FREE RESERVES, INC. PROSPECTUS
In addition, the obligations of such issuers may become
subject to laws enacted in the future by Congress, state
legislatures or referenda extending 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 Municipal Obligations may be materially affected.
CERTAIN FUNDAMENTAL INVESTMENT POLICIES
The Fund, as a fundamental policy, may not: (1) invest more
than 5% of its total assets in securities of any one issuer,
excluding the United States government, its agencies and
instrumentalities; (2) borrow money, except from banks for
temporary or emergency 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; (3) pledge, mortgage or
hypothecate its assets, except that, to secure permitted
borrowings for temporary or emergency purposes, it may pledge
securities having a market value at the time of the pledge
not exceeding 10% of the value of the Fund's total assets;
(4) 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; (5) invest more than 5%
of its total assets in securities of unseasoned issuers
which, together with their predecessors have been in
operation for less than three years; (6) 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; or
(7) concentrate more than 25% of its assets in the securities
of issuers in any single industry; provided, however, that such
limitation shall not be applicable to the purchase of Municipal
Obligations issued by governments or political subdivisions of
governments, and obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities. For purposes of
applying the policies of clauses (1) and (5), the "issuer" of a
security shall be deemed to be the entity whose assets and
revenues are committed to the payment of principal and interest
on such security, provided that the guarantee of an instrument
will be considered a separate security (subject to certain
exclusions allowed under the Investment Company Act of 1940).
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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.
For a more complete description of the fundamental and non-
fundamental investment policies summarized above and the
other fundamental investment policies applicable to the Fund,
see the Statement of Additional Information. The investment
policies of the Fund specifically identified as fundamental,
together with the Fund's investment objective, cannot be
changed without approval by holders of a "majority of the
Fund's outstanding voting shares." As defined by the
Investment Company Act of 1940, this means the vote of (i)
67% or more of the shares present at a meeting, if the
holders of more than 50% of the shares are present or
represented by proxy, or (ii) more than 50% of the shares,
whichever is less.
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MANAGEMENT OF THE FUND NUVEEN TAX-FREE RESERVES, INC. PROSPECTUS
The management of the Fund, including general supervision of
the duties performed by Nuveen Advisory under the Investment
Management Agreement, is the responsibility of the Fund's
Board of Directors.
Nuveen Advisory acts as the investment adviser for and
manages the investment and reinvestment of the assets of the
Fund. Its address is 333 West Wacker Drive, Chicago, Illinois
60606. Nuveen Advisory also administers the Fund'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 directors or officers of the Fund if elected
to such positions.
For the services and facilities furnished by Nuveen Advisory,
the Fund has agreed to pay an annual management fee in an
amount equal to .5 of 1% of the first $500 million of average
daily net assets, .475 of 1% of the next $500 million, and
.45 of 1% of average daily net assets over $1 billion. All
fees and expenses are accrued daily and deducted before
payment of dividends to investors. In addition to the
management fee of Nuveen Advisory, the Fund pays all other
costs and expenses of its operations. Included in the
expenses paid by the Fund is its share of payments under the
Distribution and Service Plan.
The management fee will be reduced or Nuveen Advisory will
assume certain Fund expenses in an amount necessary to
prevent the Fund's total expenses (including Nuveen
Advisory's management fee and its share of payments under the
Distribution and Service Plan, but excluding interest, taxes,
fees incurred in acquiring and disposing of portfolio
securities and extraordinary expenses) in any fiscal year
from exceeding .75 of 1% of the average daily net asset value
of the Fund. For the fiscal year ended February 29, 1996,
management fees amounted to .50 of 1% of the Fund's average
daily net assets, and total expenses, net of applicable
expense reimbursements, amounted to .75 of 1% of average
daily net assets. Without expense reimbursements, total
expenses for the fiscal year ended February 29, 1996 would
have been .79 of 1% of the Fund's average daily net assets.
15
<PAGE>
Nuveen Advisory was organized in 1976 and since then has
exclusively engaged in the management of municipal securities
portfolios. It currently serves as investment adviser to 21
open-end municipal securities portfolios (the "Nuveen Mutual
Funds") and 53 exchange-traded municipal securities funds
(the "Nuveen Exchange-Traded Funds"). Each of these invests
substantially all of its assets in investment grade quality,
tax-free municipal securities. As of the date of this
Prospectus, Nuveen Advisory manages approximately $30 billion
in assets held by the Nuveen Mutual Funds and the Nuveen
Exchange-Traded Funds.
Nuveen Advisory is a wholly-owned subsidiary of John Nuveen &
Co. Incorporated ("Nuveen"), 333 West Wacker Drive, Chicago,
Illinois 60606, the oldest and largest investment banking
firm (based on number of employees) specializing in the
underwriting and distribution of tax- exempt securities.
Nuveen, the principal underwriter of the Funds' shares, is
sponsor of the Nuveen Tax-Exempt Unit Trust, a registered
unit investment trust. It is also the principal underwriter
for the Nuveen Mutual Funds, and served as co-managing
underwriter for the shares of the Nuveen Exchange-Traded
Funds. Over 1,000,000 individuals have invested to date in
Nuveen's tax-exempt funds and trusts. Founded in 1898, Nuveen
is a subsidiary of The John Nuveen Company which, in turn, is
approximately 80% 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.
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<PAGE>
DIVIDENDS AND TAXES NUVEEN TAX-FREE RESERVES, INC. PROSPECTUS
DIVIDENDS
All of the net income of the Fund is declared on each
calendar day as a dividend on shares entitled to such
dividend. Net income of the Fund consists of all interest
income accrued and discount earned on portfolio assets
(adjusted for amortization of premium or discount on
securities when required for federal income tax purposes),
plus or minus any realized short-term gains or losses on
portfolio instruments since the previous dividend
declaration, less estimated expenses incurred subsequent to
the previous dividend declaration. It is not expected that
realized or unrealized gains or losses on portfolio
instruments will be a meaningful factor in the computation of
the Fund's net income. Dividends are paid monthly and are
reinvested in additional shares of the Fund at net asset
value or, at the shareholder's option, paid in cash. Net
realized long-term capital gains, if any, will be paid not
less frequently than annually and reinvested in additional
shares of the Fund at net asset value unless the shareholder
has elected to receive capital gains in cash. The Fund does
not anticipate realizing any significant long-term capital
gains or losses.
FEDERAL INCOME TAX MATTERS
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 for treatment as a regulated
investment company, a Fund must satisfy certain requirements
relating to the sources of its income, diversification of its
assets and distribution of its income to shareholders. As a
regulated investment company, a Fund will not be subject to
federal income tax on the portion of its net investment
income and net realized capital gains that is currently
distributed to shareholders. The Fund also intends to satisfy
conditions which will enable interest income from Municipal
Obligations, that is exempt from federal income tax in the
hands of the Fund, to retain such tax-exempt status when
distributed to the shareholders of the Fund. Distributions of
interest income on Municipal Obligations may not be exempt
from state or local income taxes.
Distributions by the Fund of net interest income received, if
any, from taxable temporary investments and net short-term
capital gains, if any, realized by the Fund will be taxable
to shareholders as ordinary income. So long as the Fund
qualifies as a regulated investment company under the Code,
distributions to shareholders will not qualify for the
dividends received deduction for corporations. If in any year
the
17
<PAGE>
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 taxable
income for that year, and the entire amount of distributions
to shareholders would be taxable to shareholders as ordinary
income.
The Code provides that interest on indebtedness incurred or
continued to purchase or carry tax-free investments, such as
shares of the Fund, is not deductible. Under rules used by
the Internal Revenue Service for determining when borrowed
funds are considered used for the purpose of purchasing or
carrying particular assets, the purchase of shares may be
considered to have been made with borrowed funds even though
such funds are not directly traceable to the purchase of
shares.
Tax-exempt income is taken into account in calculating the
amount of social security and railroad retirement benefits
that may be subject to federal income tax.
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 who are "related persons" of such substantial users.
Accordingly, the Fund may not be an appropriate investment
for shareholders who are considered either a "substantial
user" or a "related person" thereof. Such persons should
consult their tax advisers before investing in the Fund.
The Fund may invest in private activity bonds, the interest
on which is a specific item of tax preference for purposes of
computing the alternative minimum tax on corporations and
individuals. This type of private activity bond includes most
industrial and housing revenue bonds. Shareholders whose tax
liability is determined under the alternative minimum tax
will be taxed on their share of the Fund's exempt-interest
dividends that were paid from income earned on these bonds.
In addition, the alternative minimum taxable income for
corporations is increased by 75% of the difference between an
alternative measure of income ("adjusted current earnings")
and the amount otherwise determined to be alternative minimum
taxable income. Interest on all Municipal Obligations, and
therefore all distributions by the Fund that would otherwise
be tax exempt, is included in calculating a corporation's
adjusted current earnings.
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<PAGE>
NUVEEN TAX-FREE RESERVES, INC. PROSPECTUS
The Fund is required in certain circumstances to withhold 31%
of taxable dividends 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 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. 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 consult their own tax advisers
for more detailed information concerning the federal taxation
of the Fund and the federal, state and local tax consequences
to its shareholders.
STATE AND LOCAL TAX ASPECTS
The exemption from federal income tax for distributions of
interest income from Municipal Obligations 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
taxation of such distributions, and shareholders of the Fund
are advised to consult their own tax advisers in that regard.
19
<PAGE>
NET ASSET VALUE
Net asset value of the Fund's shares will be determined by
The Chase Manhattan Bank, N.A., the Fund's custodian, as of
12:00 noon Eastern Time, on each day on which the Federal
Reserve Bank of Boston is normally open for business (a
"business day") and as of 12:00 noon, Eastern Time, on any
other day during which there is a sufficient degree of
trading in the Fund's portfolio securities such that the
current net asset value of the Fund's shares might be
materially affected by changes in the value of portfolio
securities. The net asset value per share will be computed by
dividing the sum of 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.
The Fund seeks to maintain a net asset value of $1.00 per
share. In this connection, the Fund values its portfolio
securities on the basis of their amortized cost. This method
values a security at its cost on the date of purchase and
thereafter assumes a constant amortization to maturity of any
discount or premium, regardless of the impact of fluctuating
interest rates on the market value of the security. For a
more complete description of the amortized cost valuation
method and its effect on existing and prospective
shareholders, see the Statement of Additional Information.
There can be no assurance that the Fund will be able at all
times to maintain a net asset value of $1.00 per share.
20
<PAGE>
HOW TO BUY FUND SHARES NUVEEN TAX-FREE RESERVES, INC. PROSPECTUS
In General Fund shares may be purchased on business days (as defined
under "Net Asset Value") at the net asset value which is next
computed after receipt of an order in proper form and receipt
of payment in federal funds. Purchases by federal funds are
recommended. However, purchases may also be made by bank
wire, Federal Reserve draft or check. The minimum initial
investment is $1,000. Subsequent investments for the account
of the shareholder must be in amounts of $100 or more. The
Fund reserves the right to reject purchase orders and to
waive or increase the minimum investment requirements. The
Fund has waived the foregoing minimum investment requirements
for holders of certificates of beneficial interest in the
various unit investment trusts sponsored by Nuveen who are
reinvesting distributions from such investment trusts in the
Fund. The Fund reserves the right to reject purchase orders
and to waive or increase the minimum investment requirements.
In order to maximize the earnings on its assets, the Fund
strives to be invested as completely as practicable. The Fund
is normally required to make settlement in federal funds for
securities purchased. Accordingly, orders for Fund shares may
be made, and become effective on business days, as follows:
Purchase by To open an account, call Nuveen toll-free at 800.858.4084 to
Telephone obtain an account number and instructions. Information
concerning the account such as name, address and social
security or tax identification number will be taken over the
telephone. Payments may be made by wire transfer to the
United Missouri Bank of Kansas City, N.A. as follows:
United Missouri Bank of Kansas City, N.A.
ABA #101000695
Nuveen Tax-Free Reserves, Inc.
Shareholder Account No. (see above):
Shareholder Account Name:
You will be required to complete an application and mail it
to the Fund after making the initial telephone purchase.
Subsequent investments may be made by following the same wire
transfer procedure.
If an order is received by Nuveen by 12:00 noon, Eastern
Time, and federal funds are received by United Missouri Bank
of Kansas City, N.A. on the same day by 3:00 p.m., Eastern
Time, the order is effective that day. If both the order and
federal funds are not received by the times specified above,
the order will become effective the following business day.
21
<PAGE>
Purchase by To open an account, complete an application form and mail it
Mail with a check or Federal Reserve draft to Nuveen Tax-Free
Reserves, Inc., P.O. Box 5330, Denver, Colorado 80217-5330.
Subsequent investments may be made by mailing a check with
the investor's account number to the above address. The order
becomes effective as soon as the check or draft is converted
to federal funds. This usually occurs one business day after
receipt, but may take longer.
Fund Direct You can use Fund Direct to link your Fund account to your
account at your bank or other financial institution to enable
you to send money electronically between those accounts to
perform a variety of account transactions. These include
purchases of shares by telephone, investments under Automatic
Deposit Plan, and sending dividends and distributions,
redemption payments or Automatic Withdrawal Plan payments
directly to your bank account. Fund Direct privileges must be
requested via a Fund Direct Application you obtain by calling
800.621.7227. Fund Direct privileges will apply to each
shareholder listed in the registration on your account as
well as to your Authorized Dealer representative of record
unless and until SSI receives written instructions
terminating or changing those privileges. After you establish
Fund Direct for your account, any change of bank account
information must be made by signature-guaranteed instructions
to SSI as described in "How to Redeem Fund Shares."
Purchases may be made by telephone only after your account
has been established. To purchase shares in amounts up to
$250,000 through a telephone representative, call SSI at
800.621.7227. The purchase payment will be debited from your
bank account.
For more information about these purchase options and to
obtain the application forms required for some of them, call
Nuveen toll-free at 800.621.7227.
Purchase To open an account through a bank or a securities broker or
Through a dealer ("service organization"), investors should send money
Securities to that organization for transmission to the Fund and furnish
Dealer or it with the information required in the Application Form. The
Service Fund has a distribution plan pursuant to which payments are
Organization made to service organizations which provide assistance in
distributing shares or provide services to shareholders of
the Fund. See "Distribution and Service Plan."
22
<PAGE>
NUVEEN TAX-FREE RESERVES, INC. PROSPECTUS
Purchase by Unitholders of Nuveen Unit Investment Trusts ("UITs") may
Reinvestment purchase shares of the Fund by automatically reinvesting
of Nuveen Unit distributions from their Nuveen UIT. To obtain information on
Investment share purchases through investment of Nuveen UIT
Trust distributions, check the applicable box on the enclosed
Distributions Application Form or call Nuveen toll-free at 800.237.0910.
COMMENCEMENT OF DIVIDENDS
Shares are deemed to have been purchased when an order
becomes effective and are entitled to dividends commencing on
the day the order becomes effective.
THE FUND OFFERS TWO DIFFERENT TYPES OF SYSTEMATIC INVESTMENT
PROGRAMS
Automatic
Deposit Plan Once you have established a Fund account, you may make
regular investments in your Fund in an amount of $25 or more
each month by authorizing Shareholder Services, Inc. ("SSI")
to draw preauthorized checks on your bank account. There is
no obligation to continue payments and you may terminate your
participation at any time at your discretion. No charge is
made in connection with this Plan, and there is no cost to
the Fund. To obtain an application form for the Automatic
Deposit Plan, check the applicable box on the enclosed
Application Form or call Nuveen toll-free at 800.621.7227.
Payroll Direct Once you have established a Fund account, you may, with your
Deposit Plan employer's consent, make regular investments in Fund shares
of $25 or more per pay period by authorizing your employer to
deduct this amount automatically from your paycheck. There is
no obligation to continue payments and you may terminate your
participation at any time at your discretion. No charge is
made for this Plan, and there is no cost to the Fund. To
obtain an application form for the Payroll Direct Deposit
Plan, check the applicable box on the enclosed Application
Form or call Nuveen toll-free at 800.621.7227.
OTHER SHAREHOLDER PROGRAMS
Exchange
Privilege You may exchange shares of the Fund for shares of any other
open-end management investment company with reciprocal
exchange privileges advised by Nuveen Advisory (the "Nuveen
Funds"), 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 period 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
23
<PAGE>
purchased through dividend reinvestment or through
reinvestment of Nuveen UIT 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 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 Birthday,
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 investment 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 income 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. You may also make exchanges by telephone if a pre-
authorized exchange authorization, as provided on the account
Application Form, is on file with Shareholder Services, Inc.,
the Fund's shareholder service agent. The exchange privilege
may be modified or discontinued at any time.
24
<PAGE>
NUVEEN TAX-FREE RESERVES, INC. PROSPECTUS
ADDITIONAL INFORMATION
If you choose to invest in the Fund, an account will be
opened and maintained for you by SSI. Share certificates will
be issued to you only upon written request to SSI, and no
certificates will be issued for fractional shares. The Fund
reserves the right to reject any purchase order and to waive
or increase minimum investment requirements. A change in
registration or transfer of shares held in the name of your
financial adviser's firm can only be made by an order in good
form from the financial adviser acting on your behalf.
Authorized Dealers are encouraged to open single master
accounts. However, some Authorized Dealers may wish to use
SSI's sub-accounting system to minimize their internal
recordkeeping requirements. An Authorized Dealer or other
investor requesting shareholder servicing or accounting other
than the master account or sub-accounting service offered by
SSI will be required to enter into a separate agreement with
another agent for these services for a fee that will depend
upon the level of services to be provided.
Banks and other organizations through which investors may
purchase Fund shares 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 and regulations of the SEC, the Fund
reserves the right to suspend the continuous offering of its
shares at any time, but such suspension shall not affect the
shareholder's right of redemption as described in "How To
Redeem Fund Shares" below.
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DISTRIBUTION AND SERVICE PLAN
The Fund has adopted a Distribution and Service Plan (the
"Plan") pursuant to Rule 12b-1 under the 1940 Act, pursuant
to which the Fund and Nuveen pay fees to service
organizations for services rendered in the distribution of
shares of the Fund or the servicing of shareholder accounts.
Such services may include, among other things, establishing
and maintaining shareholder accounts; processing purchase and
redemption transactions; arranging for bank wires; performing
sub-accounting; answering shareholder inquiries and such
other services as Nuveen may request. Nuveen will enter into
Service Agreements with organizations who render such
services. Service payments to such organizations in annual
amounts ranging from .1 of 1% to .2 of 1% of daily average
assets of serviced accounts up to $10 million and .3 of 1%
for such assets over $10 million, a portion of which will be
paid by the Fund. Nuveen may, in its discretion, pay from its
own resources to a service organization satisfying certain
criteria an additional amount not to exceed in the case of a
given service organization the greater of (a) .05 of 1% per
year based on average assets of accounts serviced, or (b) the
amount by which the payment, if based on .30 of 1% of average
assets of accounts serviced, would have exceeded the actual
amount of the payment under the above rates.
The Plan continues in effect from year to year so long as its
continuance is approved at least annually by a vote of the
Board of Directors and a vote of the non-interested
directors. The Plan may not be amended to increase materially
the cost which the Fund may bear under the Plan without the
approval of the non-interested directors and the
shareholders, and any other material amendments of the Plan
must be approved by the non-interested directors. Nuveen also
distributes the Nuveen Tax-Exempt Money Market Fund, Inc., a
fund with similar investment objectives in which investments
can be made. The Nuveen Tax-Exempt Money Market Fund, Inc.
does not pay a distribution fee from its assets; however,
investors purchasing that fund must meet a higher minimum
investment requirement.
26
<PAGE>
HOW TO REDEEM FUND SHARES NUVEEN TAX-FREE RESERVES, INC. PROSPECTUS
In General Upon receipt of a proper redemption request on a business
day, the Fund will redeem its shares at their next determined
net asset value. You may use the telephone redemption, check
redemption, or the regular redemption procedures discussed
hereafter. The purchase and redemption methods employed will
determine when funds will be available to you. Where the
shares to be redeemed have been purchased by check or through
Fund Direct within 15 days prior to the date the redemption
request is received, the Fund will not send the redemption
proceeds until the check or Fund Direct transfer for the
purchase has cleared, which may take up to 15 days. There is
no delay when the shares being redeemed were purchased by
wiring federal funds.
Shareholders may request that the Fund provide them with
Check drafts ("Redemption Checks") drawn on the Fund's account.
Redemption Shares for which stock certificates have been issued will not
be available for redemption by the use of Redemption Checks.
Redemption Checks may be made payable to the order of any
person in an amount of $500 or more, and dividends are earned
until the Redemption Check clears. Redemption Checks clear
through the United Missouri Bank of Kansas City, N.A. (the
"Bank") and are subject to the same rules and regulations
that the Bank applies to checking accounts.
When a Redemption Check is presented, a sufficient number of
full and fractional shares in the shareholder's account will
be redeemed to cover the amount of the Redemption Check.
Shares for which stock certificates have been issued will not
be available for redemption by the use of Redemption Checks.
There must be sufficient shares in the shareholder's account
to cover the amount of each Redemption Check written or the
check will be returned. Checks should not be used to close an
account. Shareholders wishing to use Redemption Checks must
complete the appropriate section of the Application Form and
submit the enclosed signature card.
This check redemption privilege may be modified or terminated
at any time by the Fund or the Bank. The check redemption
feature does not constitute a bank checking account.
By Written You may redeem shares by sending a written request for
Request redemption directly to the Fund, c/o Shareholder Services,
Inc., P.O. Box 5330, Denver, Colorado 80217-5330, accompanied
by duly endorsed certificates, if issued. Requests for
redemption and share certificates, if issued, must be signed
by each shareholder and, if the redemption proceeds exceed
$50,000 or are payable other than to the shareholder of
record at the address of record (which address may not have
been changed in the
27
<PAGE>
preceding 30 days), the signature must be guaranteed by a
member of an approved Medallion Guarantee Program or in such
other manner as may be acceptable to the Fund. Under normal
circumstances payment will be made by check and mailed within
one business day (and in no event more than seven days) after
receipt of a redemption request in proper form.
By TEL-A-CHECK You may redeem shares by TEL-A-CHECK telephone redemptions,
with the redemption proceeds paid by check, by completing the
TEL-A-CHECK authorization section of the enclosed Application
Form and returning it to Nuveen or SSI. If you did not
authorize TEL-A-CHECK when you opened your account, you may
obtain authorization by writing the Fund. The 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. If you have
authorized TEL-A-CHECK and your account address has not
changed within the last 30 days, you can redeem shares that
are held in non-certificate form and that are worth $50,000
or less by calling Nuveen at 800.621.7227. While you or
anyone authorized by you may make telephone redemption
requests, redemption checks will be issued only in the name
of the shareholder of record and will be mailed to the
address of record. If your telephone 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 will be effected and the redemption check will be
mailed on the following business day. For 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 affected and the redemption check will be mailed on the
second business day.
By TEL-A-WIRE Before you may redeem shares by TEL-A-WIRE telephone
redemptions, with the redemption proceeds paid by Federal
Reserve wire, you must complete the TEL-A-WIRE authorization
section of the enclosed Application Form and return it to
Nuveen or SSI. If you did not authorize TEL-A-WIRE 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.
If you have authorized TEL-A-WIRE redemption, you can take
advantage of the following expedited redemption procedures to
redeem shares held in non-certificate form that are worth at
least $1,000. You may make TEL-A-WIRE redemption requests by
calling Nuveen at 800.858.4084. If a redemption request is
received by 12:00 noon Eastern Time, the shares to be
redeemed do not earn income on that
28
<PAGE>
NUVEEN TAX-FREE RESERVES, INC. PROSPECTUS
day, but the redemption is effected and proceeds are
ordinarily wired on the same day to the commercial bank
account designated. If the redemption request is received
after 12:00 noon Eastern Time, the shares to be redeemed earn
income on the day the request is received, and the redemption
is effected and proceeds are ordinarily wired the next
business day. 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. The Fund
reserves the right to charge a fee for TEL-A-WIRE.
By Fund Direct Before you may redeem shares by Fund Direct telephone
redemptions, with the redemption proceeds being sent via
automated clearing house wire, you must complete the Fund
Direct Application Form and return it to Nuveen or SSI. If
you did not authorize Fund Direct when you opened your
account, you may obtain an Application Form by calling
800.621.7227. The Fund Direct Application Form 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. Proceeds of share
redemptions made by Fund Direct will be transferred by
automated clearing house only to the commercial bank account
specified by the shareholder.
If you have authorized Fund Direct, you can take advantage of
the following expedited redemption procedures to redeem
shares held in non-certificate form. You may make Fund Direct
redemption requests by calling Nuveen at 800.621.7227. If
your telephone 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 and the funds
will be wired on the following business day. For 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 and the funds will be wired on the
second business day.
How to Change In order to establish multiple accounts, or to change the
Authorized account or accounts designated to receive redemption
Redemption proceeds, a written request specifying the change must be
Instructions 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 documentation may be required
from corporations, executors, trustees or personal
representatives.
The Fund reserves the right to refuse a telephone redemption
and, at its option, may limit the timing, amount or frequency
of these redemptions. This procedure may be
29
<PAGE>
modified or terminated at any time, on 30 days' notice, by
the Fund. The Fund, SSI and Nuveen will not be liable for
following telephone instructions reasonably believed to be
genuine. The Fund employs procedures reasonably designed to
confirm that telephone instructions are genuine. These
procedures include recording all telephone instructions and
requiring up to three forms of identification prior to acting
upon a caller's instructions. If the Fund does not follow
reasonable procedures for protecting shareholders against
loss on telephone transactions, it may be liable for any
losses due to unauthorized or fraudulent telephone
instructions.
Fund shareholders may also redeem shares through their
Redemption accounts with service organizations in accordance with
Through procedures established by each such service organization. The
Service Fund has no redemption charge, but service organizations may
Organizations impose transaction fees or other charges relating to the
redemption of Fund shares. Individual shareholders should
determine from their service organizations the procedures and
charges, if any, that govern redemptions.
Automatic If you own shares currently worth at least $10,000, you may
Withdrawal establish an Automatic Withdrawal Plan by completing an
Plan application form for the Plan. You may obtain an application
form by checking the applicable box on the enclosed
Application Form or by calling Nuveen toll-free at
800.621.7227. The Plan permits you to request periodic
withdrawals on a monthly, quarterly, semi-annual or annual
basis in an amount of $50 or more. All shares of the Fund you
own will be accumulated in the Plan, with a sufficient number
of shares being redeemed periodically to meet the requested
withdrawal payments. Depending upon the size of the payments
requested under the Plan, redemptions for the purpose of
making such payments may reduce or even exhaust your account.
Withdrawals under this Plan should not, therefore, be
considered a yield on investment. An Automatic Withdrawal
Plan may be terminated at any time by you or the Fund. To
obtain an application form for the Automatic Withdrawal Plan,
check the applicable box on the enclosed Application Form or
call Nuveen toll-free at 800.621.7227.
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
reserves the right to have the Fund make payment in whole or
in part in securities or other
30
<PAGE>
NUVEEN TAX-FREE RESERVES, INC. PROSPECTUS
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.
Investor Investor inquiries may be made through any participating
Inquiries service organization (see "How to Buy Fund Shares--
Distribution and Service Plan" on page 26), directly of the
Fund in writing or by calling John Nuveen & Co. Incorporated,
the Fund's distributor at 800.621.7227.
31
<PAGE>
GENERAL INFORMATION
Custodian, The custodian of the Fund's assets is The Chase Manhattan
Shareholder Bank, N.A., 770 Broadway, New York, New York 10003. The
Services Agent custodian performs custodial fund accounting and portfolio
and Transfer accounting services. Shareholder Services, Inc., P.O. Box
Agent 5330, Denver Colorado 80217-5330 is the transfer, shareholder
services and dividend paying agent for the Fund and performs
bookkeeping, data processing and administrative services
incident to the maintenance of shareholder accounts.
The Fund was incorporated in Maryland on July 6, 1982. Its
Capital Stock authorized capital stock consists of a single class of
2,000,000,000 shares of common stock, $.01 par value. All
shares have equal non-cumulative voting rights and equal
rights with respect to dividends declared by the Fund and
assets upon liquidation. Shares are fully paid and non-
assessable when issued and have no pre-emptive, conversion or
exchange rights.
32
<PAGE>
NUVEEN TAX-FREE RESERVES, INC. PROSPECTUS
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
intended 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 1996 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 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 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
deductions with certain exceptions. The tax rates shown here
may be higher or lower than your actual tax rate.
Marginal tax rates for joint taxpayers with four personal
exemptions
<TABLE>
<CAPTION>
Tax-exempt yield
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2.00% 2.50% 3.00% 3.50% 4.00% 4.50% 5.00%
---------------------------------------------------------------------------
<CAPTION>
Federal
Federal Adjusted
Taxable Gross Federal
Income Income Tax
(1,000's) (1,000's) Rate Taxable equivalent yield
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0-40.1 $ 0-118.0 15.0% 2.35 2.94 3.53 4.12 4.71 5.29 5.88
40.1-96.9 0-118.0 28.0 2.78 3.47 4.17 4.86 5.56 6.25 6.94
118.0-177.0 29.0 2.82 3.52 4.23 4.93 5.63 6.34 7.04
96.9-147.7 0-118.0 31.0 2.90 3.62 4.35 5.07 5.80 6.52 7.25
118.0-177.0 32.0 2.94 3.68 4.41 5.15 5.88 6.62 7.35
177.0-299.5 34.5 3.05 3.82 4.58 5.34 6.11 6.87 7.63
147.7-263.8 118.0-177.0 37.0 3.17 3.97 4.76 5.56 6.35 7.14 7.94
177.0-299.5 40.0 3.33 4.17 5.00 5.83 6.67 7.50 8.33
Over 299.5 37.0 3.17 3.97 4.76 5.56 6.35 7.14 7.94
Over 263.8 177.0-299.5 44.0 3.57 4.46 5.36 6.25 7.14 8.04 8.93
Over 299.5 41.0 3.39 4.24 5.08 5.93 6.78 7.63 8.47
</TABLE>
33
<PAGE>
[LOGO OF NUVEEN]
Nuveen Tax-Free Money Market Funds
Application Form
Note: This application form may not be used for all types of accounts and
certain optional fund services. Please obtain special application materials
by checking the boxes in item 7 on the other side of this sheet. If you need
any assistance in completing this form, call Nuveen toll-free at 800.621.7227.
1 ACCOUNT REGISTRATION AND INFORMATION
Please check the box that describes the type of account you are opening, and
complete all the information which applies to your account type.
Note: Registration for two or more persons will be as joint tenants with right
of survivorship unless noted otherwise.
[_] Individual
Last name, first, initial Social security number
[_] Joint tenant (if any)
Last name, first, initial
[_] Gift to a minor
Name of trustee State name under the Uniform Gift to Minors Act
Minor's name (only one minor may be named) Minor's social security number
[_] Trust [_] Custodian
Trustee's or custodian's name Trust's agreement date (mandatory)
Trust's name Trust's taxpayer I.D. number
2 MAILING ADDRESS
Street address City, state, zip code
Daytime telephone number Evening telephone number
(include area code) (include area code)
3 FUND SELECTION
Please indicate in which Nuveen Fund(s) you would like to open an account and
the amount you would like to invest.
State funds may not be registered for sale in all states.
[_] Enclosed is my check in the amount payable to the Fund(s) indicated below.
[_] Funds in the amount listed below were wired to United Missouri Bank of
Kansas City.
Note: Please call Nuveen at 800.858.4084 to obtain an account number before
wiring funds.
Nuveen Money Market Funds
$ Tax-Free Reserves, Inc. (Minimum initial investment $1,000.)
- ----------------
$ California Tax-Free Money Market Fund (Minimum initial
- ----------------investment $5,000.)
$ Massachusetts Tax-Free Money Market Fund (Minimum initial
- ----------------investment $5,000.)
$ New York Tax-Free Money Market Fund (Minimum initial investment
- ----------------$5,000.)
Please enclose a separate check made payable to each fund in which you are
investing. If more than one fund is selected, any optional features chosen will
apply to all fund accounts. If you prefer to wire funds to an open account, or
need any assistance in completing this form, call Nuveen toll-free at
800.858.4084.
4 DISTRIBUTION OPTIONS
If no box is checked, all distributions from a Fund will be reinvested into the
same Fund.
[_] Dividends are to be paid by check.
[_] Capital gains are to be paid by check.
5 INFORMATION ABOUT YOUR FINANCIAL ADVISER
Please supply the name and address of your financial adviser so that they
will receive duplicate copies of your fund statements.
Financial adviser's name Firm name
Street address City, state, zip code
6 CERTIFICATION AND SIGNATURE(S)
Sign in ink exactly as the name (or names) appear above in section 1, Account
registration.
I certify that I have power and authority to establish this account and select
the options requested. I also release the Fund(s), Shareholder Services, Inc.
(SSI), John Nuveen & Co. Incorporated, United Missouri Bank of Kansas City,
N.A., First Interstate Bank of Denver, N.A. and their agents and representatives
from all liability and agree to indemnify each of them from any and all losses,
damages or costs for acting in good faith in accordance with instructions
believed to be genuine. With respect to the options identified on items #8, #9
and #11 of this application, I understand that the Fund(s), SSI and Nuveen will,
not be liable for following telephone instructions reasonably believed to be
genuine. I also understand that the Fund(s) employ procedures reasonably
designed to confirm that telephone instructions are genuine and if these
procedures are not followed, the Fund(s) may be liable for any losses due to
unauthorized or fraudulent telephone instructions. I agree that the
authorizations herein shall continue until SSI receives written notice of a
change or modification signed by all account owners. I understand that each
account is subject to the terms of the prospectus of the Nuveen fund selected,
as amended from time to time, and subject to acceptance by that Fund in Chicago,
Illinois and to the laws of Illinois. All terms shall be binding upon my heirs,
representatives and assigns. I certify that I have received and read the current
prospectus for each Fund I have selected. Under penalties of perjury, I certify
(1) that the number shown on this Application Form is my correct Social Security
or Taxpayer Identification Number, and (2) that the IRS has not notified me that
I am subject to backup withholding (Line out clause (2) if you are subject to
backup withholding.)
Individual's signature Date Joint tenant's signature (if applicable) Date
Custodian/Trustee signature (if applicable)
See reverse side for additional optional fund services.
Mail this completed application form to:
Nuveen Tax-Free Money Market Funds
P.O. Box 5330
Denver, Colorado 80217-5330
<PAGE>
[LOGO OF NUVEEN]
Nuveen
Tax-Free Money
Market Funds
Application
Form
Optional Fund Services
7 OPTIONAL FUND SERVICES
Please send me application materials for these optional fund services which are
described in the prospectus:
<TABLE>
<CAPTION>
<S> <C> <C>
[_] Automatic Deposit Plan [_] Automatic Withdrawal Plan [_] Fund Direct
[_] Payroll Direct Deposit Plan [_] UIT Reinvestment
</TABLE>
8 TEL-A-WIRE AUTHORIZATION
You can select Option A, Option B or both.
By electing this option, I authorize SSI and Nuveen to honor telephone
instructions to redeem my Fund shares (minimum $1,000), subject to the terms and
conditions described in the prospectus.
[_] OPTION A
By completing this section, I elect to have redemption proceeds wired to my
personal checking, NOW or money market account at a commercial bank. (Attach a
check marked "void" and complete Option A.)
Name of bank Bank's routing code Bank's telephone number
(include area code)
Bank's street address Bank's city, state and zip code
Your bank account name Your bank account number
[_] OPTION B
By completing this section, I elect to have redemption proceeds wired in my name
to the commercial bank account of my financial adviser's firm. (A representative
of that firm must complete and sign the second part of Option B.)
Name of financial adviser's firm Firm's telephone number (include area code)
Firm's street address Firm's city, state and zip code
Your account name Your account number
If you have selected Option B, this section must be completed by your financial
adviser.
Name of bank of financial adviser's firm Bank's telephone number Routing code
(include area code)
Bank's street address Bank's city, state and zip code
Bank's account number Financial adviser's signature Date
9 TEL-A-CHECK AUTHORIZATION
[_] I hereby authorize the Fund and its agents to honor telephone instructions
to redeem shares worth $50,000 or less from my account and send those proceeds
by check payable to me to my address of record, subject to the terms and
conditions described in the prospectus.
10 CHECK REDEMPTION AUTHORIZATION
You must check the box to elect this option.
[_] By checking this box, you authorize drafts drawn on the Fund to be honored
and the redemption of a sufficient number of Fund shares to pay such draft. Read
the instructions and explanation below carefully before completing this section
and return the completed signature card with this application form.
Joint accounts.
You must complete this section to elect this option.
[_] Either owner of the fund(s) may sign redemption checks.
[_] All owners of the fund(s) are required to sign redemption checks.
A. Checks must be on forms provided by the Fund and for a minimum of $500 or
they will not be honored. Checks are authorizations to redeem Fund shares
and are payable through the United Missouri Bank of Kansas City, N.A. (the
"Bank").
B. Check forms will not be issued until a completed signature card is received
by the Fund.
C. Checks requiring redemption of shares held for 15 days or less that were
not purchased by "wire transfer" of federal funds or for which there are
insufficient shares to cover payment will not be honored.
D. Unless one signer is authorized on the account application form and
signature card, each check must be signed by all account owners or it will
not be honored. If SSI receives written notice by either owner of a
revocation of the authorization to sign individually, all account owners
will be required to sign redemption checks. Checks must be signed exactly
as registered.
E. The privilege is subject to the Fund's and the Bank's rules and
regulations, and applicable governmental regulations, as amended from time
to time.
F. The Fund may refuse to honor checks and may refuse to effect redemptions to
pay checks whenever the right of redemption has been suspended or
postponed, or whenever the account is otherwise impaired.
G. The account owner agrees to examine confirmations and cancelled checks and
to notify SSI of any unauthorized or missing signature or endorsement or
alteration on the check or error on the confirmation within 30 days after
mailing to owner. Failure to do so shall preclude any claim against the
Fund, the Bank, SSI or their representatives and agents by reason of any
unauthorized or missing signature or endorsement, alteration, error or
forgery of any kind.
11 TELEPHONE EXCHANGE AUTHORIZATION
You must check the box to elect this option.
[_] I hereby authorize the fund and its agents to honor telephone instructions
to invest redemption proceeds from the fund into other Nuveen Mutual Funds,
subject to the terms and conditions described in the prospectus.
Mail the completed application form to:
Nuveen Tax-Free Money Market Funds
P.O. Box 5330
Denver, Colorado 80217-5330
- --------------------------------------------------------------------------------
Internal use only
Check writing signature card
Please indicate the Nuveen Fund(s) to the right for which this signature card
applies.
In order to process this card, you must write your account number in the space
provided.
[_] Nuveen Tax-Free Reserves, Inc.
[_] Nuveen California Tax-Free Money Market Fund, Inc.
[_] Nuveen Massachusetts Tax-Free Money Market Fund, Inc.
[_] Nuveen New York Tax-Free Money Market Fund, Inc.
Customer account number
Please print the names of the registered owners or legal representatives and
sign in the space provided below.
[_] Check here if more than one signature will be required on checks.
1. Authorized account signer 2. Authorized account signer
1. Authorized account signature 2. Authorized account signature
<PAGE>
PRINCIPAL UNDERWRITER
John Nuveen & Co. Incorporated
Investment Bankers
333 West Wacker Drive
Chicago, Illinois 60606
312.917.7700
INVESTMENT ADVISER
Nuveen Advisory Corp.
Subsidiary of John Nuveen & Co.
Incorporated
333 West Wacker Drive
Chicago, Illinois 60606
CUSTODIAN
The Chase Manhattan Bank, N.A.
770 Broadway
New York, New York 10003
TRANSFER AND SHAREHOLDER SERVICES
AGENT
Shareholder Services, Inc.
P.O. Box 5330
Denver, Colorado 80217
INDEPENDENT PUBLIC ACCOUNTANTS
FOR THE FUNDS
Arthur Andersen LLP
33 West Monroe Street
Chicago, Illinois 60603
MPR-1-6.6 LOGO
LOGO
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, Illinois 60606-1286
<PAGE>
PART B--STATEMENT OF ADDITIONAL INFORMATION
NUVEEN TAX-FREE RESERVES, INC.
333 West Wacker Drive
Chicago, Illinois 60606
<PAGE>
Statement of Additional Information
July 1, 1996
Nuveen Tax-Free Reserves, Inc.
333 West Wacker Drive
Chicago, Illinois 60606
NUVEEN TAX-FREE RESERVES, INC.
Nuveen Tax-Free Reserves, Inc. (the "Fund") is an open-end diversified manage-
ment investment company. This Statement of Additional Information is not a pro-
spectus. A prospectus may be obtained from certain securities brokers and other
service organizations that have entered into service agreements with the Fund
or from John Nuveen & Co. Incorporated, 333 West Wacker Drive, Chicago, Illi-
nois 60606. This Statement of Additional Information relates to, and should be
read in conjunction with, the Prospectus dated July 1, 1996.
<TABLE>
<S> <C>
Table of Contents Page
- ------------------------------------------------------------
Fundamental Policies and Investment Portfolio 2
- ------------------------------------------------------------
Management 9
- ------------------------------------------------------------
Investment Adviser and Investment Management Agreement 12
- ------------------------------------------------------------
Portfolio Transactions 13
- ------------------------------------------------------------
Net Asset Value 14
- ------------------------------------------------------------
Tax Matters 16
- ------------------------------------------------------------
Distribution and Service Agreements 19
- ------------------------------------------------------------
Yield Information 21
- ------------------------------------------------------------
Independent Public Accountants and Custodian 24
- ------------------------------------------------------------
</TABLE>
The audited financial statements for the fiscal year ended February 29, 1996
appearing in the Fund's Annual Report are incorporated herein by reference. The
Annual Report accompanies this Statement of Additional Information.
Principal Underwriter Investment Adviser Transfer and Shareholder
John Nuveen & Co. Incorporated Services Agent
Nuveen Advisory Corp.,
Subsidiary of John
Nuveen & Co.
Incorporated
Shareholder Services,
Chicago: Inc.
333 West Wacker Drive P.O. Box 5330
Chicago, Illinois 60606 333 West Wacker Drive Denver, Colorado 80217-
312.917.7700 Chicago, Illinois 5330
60606
New York: Independent Public
10 East 50th Street Custodian Accountants
New York, New York 10022 for the Fund
212.207.2000 The Chase Manhattan Arthur Andersen LLP
Bank, N.A. 33 West Monroe Street
770 Broadway Chicago, Illinois 60603
New York, New York
10003
<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;
(12) Invest more than 5% of its total assets in securities of unseasoned is-
suers which, together with their predecessors, have been in operation for less
than three years;
2
<PAGE>
(13) 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;
(14) 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;
(15) Purchase or retain the securities of any issuer other than the securities
of the Fund if, to the Fund's knowledge, those directors of the Fund, or those
officers and directors of Nuveen Advisory Corp. ("Nuveen Advisory"), who indi-
vidually own beneficially more than 1/2 of 1% of the outstanding securities of
such issuer, together own beneficially more than 5% of such outstanding secu-
rities.
For the purpose of applying the limitations set forth in paragraphs (2) and
(12) 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-gov-
ernmental user, such as an industrial corporation or a privately owned or op-
erated 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 obliga-
tion of a superior or unrelated governmental entity or other entity (other
than a bond insurer) it shall be included in the computation of securities
owned that are issued by such governmental entity or other entity.
If, however, a security is guaranteed by a governmental entity or some other
entity (other than a bond insurer), such as a bank guarantee or letter of
credit, such a guarantee or letter or credit would be considered a separate
security and would be treated as an issue of such government, other entity or
bank. The Fund's present policy, which is not a fundamental policy, is that it
will not hold securities of a single bank, including 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 fundamental investment policies, together with the Fund's in-
vestment objective and other fundamental policies, cannot be changed without
approval by holders of a "majority 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 shares present at a meeting, if the holders of more than
50% of the shares are present or represented by proxy, or (ii) more than 50%
of the shares, whichever is less. The foregoing restrictions and limitations
will apply only at the time of purchase or securities and will not be consid-
ered violated unless an excess of deficiency occurs or exists immediately af-
ter and as a result of an acquisition of securities, unless otherwise indicat-
ed.
PORTFOLIO SECURITIES
As described in the Prospectus, the Fund will invest primarily in a diversi-
fied portfolio of Municipal Obligations consisting of money market instruments
issued by governmental authorities. In general, Municipal Obligations include
debt obligations issued to obtain funds for various public purposes,
3
<PAGE>
including construction of a wide range of public facilities. Industrial devel-
opment bonds and pollution control bonds that are issued by or on behalf of
public authorities to finance various privately-operated facilities are in-
cluded within the term Municipal Obligations if the interest paid thereon is
exempt from federal income tax.
The following is a more complete description of certain short-term Municipal
Obligations in which the Fund may invest:
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 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.
Variable and Floating Rate Instruments. Certain Municipal Obligations, certain
instruments issued, guaranteed or sponsored by the U.S. government or its agen-
cies, and certain debt instruments issued by domestic banks or corporations,
may carry variable or floating rates of interest. Such instruments bear inter-
est at rates which are not fixed, but which vary with changes in specified mar-
ket rates or indices, such as a bank prime rate or 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 specified
interest rate indices. Typically such instruments carry demand features permit-
ting the Fund to recover the full principal amount thereof upon specified
notice.
4
<PAGE>
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.
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 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.
5
<PAGE>
WHEN-ISSUED SECURITIES
As described under "Investment Policies--Municipal Obligations" in the Pro-
spectus, 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 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 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 fluc-
tuation, 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 Obli-
gation on a when-issued or delayed delivery basis, it will record the transac-
tion 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 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 com-
mitments. The Fund will only make commitments to purchase Municipal Obliga-
tions on a when-issued or delayed delivery basis with the intention of actu-
ally 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-is-
sued security is sold before delivery any gain or loss would not be tax-ex-
empt.
TEMPORARY INVESTMENTS
The Prospectus discusses briefly the Fund's ability to invest a portion of its
assets on a temporary basis or for defensive purposes in taxable "temporary
investments." As stated in the Prospectus, the Fund to date has not invested
in and has no present intention of investing in such temporary investments. In
any event, temporary investments will not exceed 20% of the Fund's assets ex-
cept when made for defensive purposes. The Fund will invest only in temporary
investments which, in the opinion of Nuveen Advisory, are of "high grade"
quality and have remaining maturities of 397 days or less. Temporary invest-
ments include obligations of the United States Government, its agencies or in-
strumentalities; debt securities of issuers having, at the time of purchase, a
quality rating within the two highest grades by either Moody's Investors Serv-
ice, 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 ei-
ther 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 Ob-
ligations and U.S. Government obligations subject to short-term repurchase
agreements.
6
<PAGE>
Subject to the foregoing limitations, the Fund may invest in the following tem-
porary 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 days to nine months. Commercial paper may be purchased from
U.S. corporations.
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 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
7
<PAGE>
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 liq-
uidating 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 deter-
mine 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.
Variable and Floating Rate Instruments--See description on page 4.
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-1 and SP-1, respectively. Obligations designated
VMIG-1 or MIG-1 are the best quality, enjoying strong protection from estab-
lished cash flows of funds for their servicing or from established and broad-
based access to the market for refinancing, or both. The designation SP-1 indi-
cates 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.
8
<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 obligation from the Fund's portfo-
lio, 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 Fund, including general supervision of the duties per-
formed by Nuveen Advisory under the Investment Management Agreement, is the re-
sponsibility of its Board of Directors. There are six directors of the Fund,
two of whom are "interested persons" (as the term "interested persons" is de-
fined in the Investment Company Act of 1940) and four of whom are "disinter-
ested persons". The names and business addresses of the directors and officers
of the Fund and their ages and principal occupations and other affiliations
during the past five years are set forth below, with those directors who are
"interested persons" of the Fund indicated by an asterisk.
<TABLE>
- -------------------------------------------------------------------------------------
<CAPTION>
POSITIONS AND
OFFICES WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS AGE FUND DURING PAST FIVE YEARS
- -------------------------------------------------------------------------------------
<C> <C> <C> <S>
Timothy R. 47 Chairman of the Chairman (since July 1, 1996) and Direc-
Schwertfeger* Board and Direc- tor, formerly Executive Vice President of
333 West Wacker tor The John Nuveen Company (since March 1992)
Drive and of John Nuveen & Co. Incorporated;
Chicago, IL 60606 Chairman (since July 1, 1996) and Director
(since October 1, 1992) of Nuveen Advisory
Corp. and Nuveen Institutional Advisory
Corp.
- -------------------------------------------------------------------------------------
Anthony T. Dean* 51 President and President (since July 1, 1996) and Direc-
333 West Wacker Director tor, formerly Executive Vice President of
Drive The John Nuveen Company (since March 1992)
Chicago, IL 60606 and of John Nuveen & Co. Incorporated;
President (since July 1, 1996) and Direc-
tor (since October 1, 1992) of Nuveen Ad-
visory Corp. and Nuveen Institutional Ad-
visory Corp.
- -------------------------------------------------------------------------------------
Lawrence H. Brown 61 Director Retired (August 1989) as Senior Vice Pres-
201 Michigan Avenue ident of The Northern Trust Company.
Highwood, IL 60040
- -------------------------------------------------------------------------------------
Anne E. Impellizerri 63 Director President and Chief Executive Officer of
3 West 29th Street Blanton-Peale Institute of Religion and
New York, NY 10001 Health (since December 1990); prior there-
to, Vice President of New York City Part-
nership (from 1987 to 1990).
- -------------------------------------------------------------------------------------
Margaret K. Rosen- 69 Director Helen Ross Professor of Social Welfare
heim Policy, School of Social Service Adminis-
969 East 60th Street tration, University of Chicago.
Chicago, IL 60637
</TABLE>
- --------------------------------------------------------------------------------
9
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
POSITIONS AND PRINCIPAL OCCUPATIONS
NAME AND ADDRESS AGE OFFICES WITH FUND DURING PAST FIVE YEARS
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <S>
Peter R. Sawers 63 Director Adjunct Professor of Business and Economics,
22 The Landmark University of Dubuque, Iowa; Adjunct
Northfield, IL 60093 Professor, Lake Forest Graduate School of
Management, Lake Forest, Illinois (since
January 1992); prior thereto, Executive
Director, Towers Perrin Australia (management
consultant) (1990); Chartered Financial
Analyst; Certified Management Consultant.
- ------------------------------------------------------------------------------------------------------------------------------------
William M. Fitzgererald 32 Vice President Vice President of Nuveen Advisory Corp.
333 West Wacker Drive (since December 1995); Assistant Vice
Chicago, IL 60606 President of Nuveen Advisory Corp. (from
September 1992 to December 1995); prior
thereto Assistant Portfolio Manager of
Nuveen Advisory Corp. (from June 1988 to
September 1992).
- ------------------------------------------------------------------------------------------------------------------------------------
Kathleen M. Flanagan 49 Vice President Vice President of John Nuveen & Co.
333 West Wacker Drive Incorporated
Chicago, IL 60605
- ------------------------------------------------------------------------------------------------------------------------------------
J. Thomas Futrell 40 Vice President Vice President of Nuveen Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
- ------------------------------------------------------------------------------------------------------------------------------------
Steven J. Krupa 38 Vice President Vice President of Nuveen Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
- ------------------------------------------------------------------------------------------------------------------------------------
Anna R. Kucinskis 50 Vice President Vice President of John Nuveen & Co.
333 West Wacker Drive Incorporated.
Chicago, IL 60606
- ------------------------------------------------------------------------------------------------------------------------------------
Larry W. Martin 44 Vice President and Vice President (since September 1992),
333 West Wacker Drive Assistant Secretary Assistant Secretary and Assistant General
Chicago, IL 60606 Counsel of John Nuveen & Co. Incorporated;
Vice President (since May 1993) and Assistant
Secretary of Nuveen Advisory Corp.;
Vice President (since May 1993) and Assistant
Secretary (since January 1992) of
Nuveen Institutional Advisory Corp.;
Assistant Secretary of The John Nuveen Company
(since February 1993).
- ------------------------------------------------------------------------------------------------------------------------------------
O. Walter Renfftlen 56 Vice President and Vice President and Controller of The John
333 West Wacker Drive Controller Nuveen Company (since March 1992), John
Chicago, IL 60606 Nuveen & Co. Incorporated, Nuveen Advisory
Corp. and Nuveen Institutional Advisory
Corp.
- ------------------------------------------------------------------------------------------------------------------------------------
Thomas C. Spalding, Jr. 44 Vice President Vice President of Nuveen Advisory Corp.
333 West Wacker Drive and Nuveen Institutional Advisory Corp.;
Chicago, IL 60606 Chartered Financial Analyst.
</TABLE>
10
<PAGE>
<TABLE>
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS
NAME AND ADDRESS AGE OFFICES WITH FUND DURING PAST FIVE YEARS
- -----------------------------------------------------------------------------------------
<C> <C> <C> <S>
H. William Stabenow 61 Vice President and Vice President and Treasurer of The John
333 West Wacker Treasurer Nuveen Company (since March 1992), John
Drive Nuveen & Co. Incorporated, Nuveen Advisory
Chicago, IL 60606 Corp. and Nuveen Institutional Advisory
Corp. (since January 1992).
- -----------------------------------------------------------------------------------------
James J. Wesolowski 45 Vice President and Vice President, General Counsel and Secre-
333 West Wacker Secretary tary of The John Nuveen Company (since
Drive March 1992), John Nuveen & Co. Incorporat-
Chicago, IL 60606 ed, Nuveen Advisory Corp. and Nuveen In-
stitutional Advisory Corp.
- -----------------------------------------------------------------------------------------
Gifford R. Zimmerman 39 Vice President and Vice President (since September 1992), As-
333 West Wacker Assistant Secretary sistant Secretary and Assistant General
Drive Counsel of John Nuveen & Co. Incorporated;
Chicago, IL 60606 Vice President (since May 1993) and Assis-
tant Secretary of Nuveen Advisory Corp.;
Vice President (since May 1993) and Assis-
tant Secretary (since January 1992) of
Nuveen Institutional Advisory Corp.
</TABLE>
- --------------------------------------------------------------------------------
Timothy R. Schwertfeger and Margaret K. Rosenheim serve as members of the Exec-
utive Committee of the Board of Directors. The Executive Committee, which meets
between regular meetings of the Board of Directors, is authorized to exercise
all of the powers of the Board of Directors.
The directors of the Fund are also directors, or trustees, as the case may be,
of the 20 other Nuveen open-end portfolios and 53 Nuveen closed-end funds.
The following table sets forth compensation paid by Nuveen Tax-Free Reserves,
Inc. during the fiscal year ended February 29, 1996 to each of the directors.
Nuveen Tax-Free Reserves, Inc. has no retirement or pension plans. The officers
and directors affiliated with Nuveen serve without any compensation from the
Nuveen Tax-Free Reserves, Inc.
<TABLE>
<CAPTION>
TOTAL COMPENSATION
AGGREGATE FROM THE FUND AND
COMPENSATION FUND COMPLEX PAID
NAME OF DIRECTOR FROM THE FUND TO DIRECTORS(1)
- --------------------------------------------------------------------------------
<S> <C> <C>
Richard J. Franke*............................. $ 0 $ 0
Timothy R. Schwertfeger........................ 0 0
Lawrence H. Brown.............................. 777 55,500
Anne E. Impellizzeri........................... 777 63,000
John O'Toole................................... 596 47,000
Margaret K. Rosenheim.......................... 884(3) 62,322(2)
Peter R. Sawers................................ 777 55,500
</TABLE>
11
<PAGE>
- --------
* Mr. Franke retired as of June 30, 1996.
(1) The directors of the Nuveen Tax-Free Reserves, Inc. are directors or
trustees, as the case may be, of 21 Nuveen open-end funds and 53 Nuveen
closed-end funds.
(2) Includes $1,572 in interest earned on deferred compensation from prior
years.
(3) Includes $51 in interest earned on deferred compensation from prior years.
Directors who are not affiliated with Nuveen or Nuveen Advisory will receive a
$45,000 annual retainer for serving as a director of all funds for which
Nuveen Advisory serves as investment adviser and a $1,000 fee per day plus ex-
penses for attendance at all meetings held on a day on which a regularly
scheduled Board meeting is held, a $1,000 fee per day plus expenses for atten-
dance in person or a $500 fee per day plus expenses for attendance by tele-
phone at a meeting held on a day on which no regular board meeting is held and
a $250 fee per day plus expenses for attendance in person or by telephone at a
meeting of the Executive Committee. The annual retainer, fees and expenses
will be allocated among the funds on the basis of relative net assets. The
Fund requires no employees other than its officers, all of whom are compen-
sated by Nuveen.
On May 28, 1996, the officers and directors of the Fund as a group owned less
than 1% of the outstanding shares of the Fund. On May 28, 1996, Elaine D.
Sammons, 4242 Lomo Alto Dr., Dallas, TX owned of record 35,804,352.600
(11.26%) shares of the Fund.
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 Ad-
visory also administers the Fund's business affairs, provides office facili-
ties and equipment and certain clerical, bookkeeping and administrative serv-
ices, and permits any of its officers or employees to serve without compensa-
tion as directors or officers of the Fund if elected to such positions. See
"Management of the Fund" in the Prospectus.
Nuveen Advisory is paid an annual management fee in an amount equal to .5 of
1% of the first $500 million of average daily net assets, .475 of 1% of the
next $500 million, and .45 of 1% of average daily net assets over $1 billion.
The management fee will be reduced or Nuveen Advisory will assume certain Fund
expenses in an amount necessary to prevent the Fund's total expenses in any
fiscal year from exceeding .75 of 1% of the average daily net asset value of
the Fund. The net management fee for the fiscal year ended February 29, 1996
amounted to $1,566,356, after giving effect to fee waivers and expense reim-
bursements of $119,509. The net management fees for the fiscal years ended
February 28, 1995 and 1994, amounted to $1,669,835 and $1,893,196, respective-
ly. As discussed in the Prospectus, subject to the expense limitations of the
Investment Management Agreement, the Fund is responsible for payment of cer-
tain of the costs and expenses of its operations, including its share of pay-
ments under the Distribution and Service Plan.
Nuveen Advisory is a wholly-owned subsidiary of John Nuveen & Co. Incorporated
("Nuveen"), the Fund's principal underwriter. Founded in 1898, Nuveen is the
oldest and largest investment banking firm specializing in the underwriting
and distribution of tax-exempt securities and maintains the largest research
department in the investment banking community devoted exclusively to the
analysis of municipal securities. In 1961, Nuveen began sponsoring the Nuveen
Tax-Exempt Unit Trust and since
12
<PAGE>
that time has issued more than $36 billion in tax-exempt unit trusts, includ-
ing over $12 billion in tax-exempt insured unit trusts. In addition, the
Nuveen open-end and closed-end funds held approximately $31 billion in tax-ex-
empt securities under management as of the date of this Statement. Over
1,000,000 individuals have invested to date in Nuveen's tax-exempt funds and
trusts. Nuveen is a subsidiary of The John Nuveen Company which, in turn, is
approximately 80% 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 largest in the investment banking industry devoted ex-
clusively to tax-exempt securities. Nuveen's Research Department was selected
in 1995 by Research & Ratings Review, a municipal industry publication, as one
of the leading research teams in the municipal industry, based on an extensive
industry-wide poll of portfolio managers, department heads and bond buyers.
The Nuveen Research Department reviews more than $100 billion in tax-exempt
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, a 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
principal (as opposed to an agency) basis and, accordingly, has not paid any
brokerage 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 re-
search information (primarily credit analyses of issuers) and statistical 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 re-
ceipt of research information is not expected to reduce significantly Nuveen
Advisory's expenses. Any
13
<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 Directors 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 avail-
able to the Fund from time to time, it is the opinion of the Fund's Board of
Directors that the benefits available from Nuveen Advisory's organization will
outweigh any disadvantage that may arise from exposure to simultaneous transac-
tions.
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 terms of an issue of Munici-
pal Obligations purchased by the Fund, the amount of Municipal Obligations
which may be purchased in any one issue and the assets of the Fund which may be
invested in a particular issue. In addition, purchases of securities made pur-
suant to the terms of the Rule must be approved at least quarterly by the Board
of Directors 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, N.A., the Fund's custodian, as of
12:00 noon Eastern Time on each day on which the Federal Reserve Bank of Boston
is normally open and as of 12:00 noon Eastern Time on any other 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 af-
fected by such changes in the value of the portfolio securities. The Federal
Reserve Bank of Boston is not open for business on New Year's Day, Martin Lu-
ther King's Birthday, Washington's Birthday, Memorial Day, Independence Day,
Labor Day, Columbus Day, Veteran's Day, Thanksgiving Day and Christmas Day. The
net asset value per share will be computed by dividing the value of the portfo-
lio securities held by the Fund, plus cash or other assets, less liabilities,
by the total number of shares outstanding at such time.
14
<PAGE>
The Fund will seek to maintain a net asset value of $1.00 per share. In this
connection, the Fund intends to value its portfolio securities at their amor-
tized cost, as permitted by 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 pre-
mium. While this method provides certainty in valuation, it may result in peri-
ods 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 instru-
ment. 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 (the "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 Directors, pursuant to the requirements of Rule 2a-7, has estab-
lished procedures designed 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 procedures will include review of the Fund's portfolio holdings by
the Board of Directors, at such intervals as it may deem appropriate, to deter-
mine whether the net asset value calculated by using available market quota-
tions or market equivalents deviates from $1.00 per share based on amortized
cost. Market quotations and market equivalents used in such review may be ob-
tained from a pricing agent approved by the Board of Directors. The Board has
selected Nuveen Advisory 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 monitor Nuveen Advisory to see that the guidelines are followed. The
pricing agent will value the Fund's investments based on methods which include
consideration of: yield or prices of municipal obligations of comparable quali-
ty, coupon, maturity, and type; indications as to values from dealers; and gen-
eral market conditions. The pricing agent may employ electronic data processing
techniques and/or a matrix system to determine valuations. The extent of any
deviation between the Fund's net asset value based on the pricing agent's mar-
ket valuation and $1.00 per share based on amortized cost will be examined by
the Board of Directors. If such deviation
15
<PAGE>
exceeds 1/2 of 1%, the Board of Directors will promptly consider what action,
if any, will be initiated. In the event the Board of Directors determines that
a deviation exists which may result in material dilution or other unfair re-
sults to investors or existing shareholders, they have agreed to take such cor-
rective action as they regard 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; withholding dividends or payments of
distributions from capital or capital gains; redemption of shares in kind; or
establishing a net asset value per share by using available market quotations.
TAX MATTERS
FEDERAL INCOME TAX MATTERS
The following discussion of federal income tax matters is based upon the advice
of Fried, Frank, Harris, Shriver and Jacobson, 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 derive less than 30% of
its annual gross income from the sale or other disposition of any of the
following which was held for less then three months: (i) stock or securities
and (ii) certain options, futures, or forward contracts (the "short-short
test"). Third, 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 it 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 in any taxable year for which it distributes at least 90% of the sum
of (i) its "investment company taxable income" (which includes dividends, tax-
able interest, taxable original issue discount and market discount income, in-
come 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"
(as defined below) and is reduced by deductible expenses) and (ii) its "net
tax-exempt interest" (the excess of its gross tax-exempt interest income over
certain disallowed deductions).
16
<PAGE>
The Fund also intends to satisfy conditions (including requirements as to the
proportion of its assets invested in Municipal Obligations) which will enable
it to designate distributions from the interest income generated by its
investment in Municipal Obligations, which is exempt from regular federal
income tax when received by the Fund, as Exempt Interest Dividends.
Shareholders receiving Exempt Interest Dividends will not be subject to federal
income tax on the amount of such dividends.
Distributions by the Fund of net interest income received from certain taxable
temporary 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 Municipal Obligation at a
market discount, any gain realized by the Fund upon the sale or redemption of
the Municipal Obligation 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 capital gains. 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.
If a Fund has both tax-exempt and taxable income, it will use the "average an-
nual" 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.
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.
17
<PAGE>
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 Municipal Obligations, and distributions to its shareholders out of
net interest income from Municipal Obligations 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.
Among the requirements that the Fund must meet in order to qualify under
Subchapter M in any year is that less than 30% of its gross income must be de-
rived from the sale or other disposition of securities held for less than three
months.
As stated in the Prospectus under "Dividends and Taxes--Federal Income Tax Mat-
ters," 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
users." Accordingly, the Fund may not be an appropriate investment for share-
holders who are 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). For certain private activity bonds, this includes a partner-
ship and each of its partners (including 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 "re-
lated persons" under the Code. The foregoing is not a complete statement of all
of the provisions of the Code covering the definitions of "substantial user"
and "related person." 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 Municipal Obligations, 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 hospi-
tals), is included as an item of tax preference in determining the amount of a
taxpayer's alternative minimum taxable income. To the extent that the Fund re-
ceives income from Municipal Obligations subject to the alternative minimum
tax, a portion of the dividends paid by it, although otherwise exempt from fed-
eral 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 shareholders with a report indicating the percentage of Fund
income attributable to Municipal Obligations 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 Municipal Obligations, and
therefore all distributions by the Fund that would otherwise be tax-exempt, is
included in calculating the alternative measures of a corporation's taxable in-
come.
18
<PAGE>
Individuals whose "modified 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. Modified 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 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 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 and Local Tax Aspects. The exemption from federal income tax for distri-
butions of interest income from Municipal Obligations which are designated ex-
empt interest dividends will not necessarily result in exemption under the in-
come 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 taxation
of such distributions, and shareholders of the Fund are advised to consult
their own tax advisers in that regard.
DISTRIBUTION AND SERVICE PLAN
Pursuant to a Distribution Agreement with the Fund, Nuveen acts as the distrib-
utor or principal underwriter of Fund shares. Shares of the Fund are offered on
a continuous basis at net asset value without a sales charge. Under this Agree-
ment, Nuveen will pay sales and promotion expenses in connection with the of-
fering of Fund shares, including the cost of printing and distributing prospec-
tuses (except expenses of preparing, printing and distributing prospectuses to
existing shareholders and governmental agencies) and advertising and sales lit-
erature expense. Expenses incurred in registering the Fund and its shares under
federal and state securities laws will be paid by the Fund.
As discussed in the Prospectus under "Distribution and Service Plan," the Fund
has adopted a Distribution and Service Plan (the "Plan") in accordance with
Rule 12b-1 (the "Rule") of the Investment Company Act of 1940. The Plan was
adopted and has been renewed by vote of the Board of Directors
19
<PAGE>
of the Fund, and of the directors who are not interested persons of the Fund
and have no direct or indirect financial interest in the operation of the Plan
or in any agreements related to the Plan, cast in person at meetings called for
the purpose of voting on such Plan. Under the Plan, the Fund and Nuveen pay
fees to service organizations for services rendered in the distribution of
shares of the Fund or the servicing of shareholder accounts. Nuveen will enter
into Service Agreements with organizations who render such services. Service
payments to such organizations will be made in accordance with the following
schedule:
<TABLE>
<CAPTION>
DAILY AVERAGE ASSETS OF PAYMENT ON AN
SERVICED ACCOUNTS ANNUALIZED BASIS
- -----------------------------------------
<S> <C>
$0-$2 Million .10 of 1%
$2-$5 Million .15 of 1%
$5-$10 Million .20 of 1%
$10 Million and Over .30 of 1%
</TABLE>
Payment of the above fees are split evenly between Nuveen and the Fund and thus
the maximum the Fund would pay on an annualized basis is .15 of 1%. Nuveen may,
in its discretion, pay from its own resources to a service organization satis-
fying certain criteria an additional amount not to exceed in the case of a
given service organization the greater of (a) .05 of 1% per year based on aver-
age assets of accounts serviced, or (b) the amount by which the payment, if
based on .30 of 1% of average assets of accounts serviced, would have exceeded
the actual amount of the payment under the above schedule. For the fiscal year
ended February 29, 1996, the Fund paid fees to service organizations under the
Plan in the amount of $145,504.
Under the Plan, the Controller or Treasurer of the Fund will report quarterly
to the Board of Directors for its review amounts expended for distribution
services. The Plan, the Service Agreements and the Distribution Agreement may
be terminated at any time, without the payment of any penalty, by a vote of a
majority of the directors who are not "interested persons" and who have no di-
rect or indirect financial interest in the Plan or any related 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 annually by a vote of the
Board of Directors and a vote of the non-interested directors who have no di-
rect or indirect financial interest in the Plan or the related service agree-
ments 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 con-
tinuance conclude, in the exercise of reasonable business judgment and in light
of
their fiduciary duties under applicable law, that there is a reasonable likeli-
hood that the Plan will benefit the Fund and its shareholders. The Plan is in-
tended 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
Fund may bear under the Plan without shareholder approval, and any other mate-
rial amendments of the Plan 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 of the Fund will be
committed to the discretion of the non-interested directors then in office.
20
<PAGE>
No director 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. Services provided to the Fund by organizations receiving payments under
the Plan are described in "How to Purchase Fund Shares--Distribution and Serv-
ice Plan" in the Prospectus.
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.
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.
YIELD INFORMATION
As explained in the Prospectus, the historical performance may be expressed in
terms of "yield," "effective yield" or "taxable equivalent yield." The Fund's
yield and effective yield for the seven-day period ended February 29, 1996
were 2.75% and 2.79%, respectively. These various measures of performance are
described below.
The Fund's 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 investment 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 result (the "base period return") is divided by 7 and multiplied by 365,
and the resulting figure is carried to the nearest hundredth of one percent.
For the purpose of this calculation, the Fund's net investment in-
21
<PAGE>
come per share includes its accrued interest income plus or minus amortized
purchase discount or premium less accrued expenses, but does not include real-
ized capital gains or losses or unrealized appreciation or depreciation of in-
vestments.
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.
The Fund's 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.
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 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.
22
<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.
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.
23
<PAGE>
INDEPENDENT PUBLIC ACCOUNTANTS AND CUSTODIAN
Arthur Andersen LLP, independent public accountants, 33 West Monroe Street,
Chicago, Illinois 60603 have been selected as auditors for the Fund. In addi-
tion to audit services, Arthur Andersen LLP provides consultation and assis-
tance on accounting, internal control, tax and related matters. The financial
statements of the Fund incorporated by reference elsewhere in this Statement of
Additional Information and the information set forth under "Financial High-
lights" in the Prospectus have been audited by Arthur Andersen LLP as indicated
in their report with respect thereto, and are included in reliance upon the au-
thority of said firm as experts in giving said report.
The custodian of the Fund's assets is The Chase Manhattan Bank, N.A., 770
Broadway, New York, New York 10003.
24
<PAGE>
[NUVEEN LOGO]
Nuveen Tax-Free
Money Market Funds
Dependable tax-free
income for generations
TAX-FREE RESERVES
CALIFORNIA
MASSACHUSETTS
NEW YORK
[PHOTO OF COUPLE APPEARS HERE]
ANNUAL REPORT/FEBRUARY 29, 1996
<PAGE>
CONTENTS
3 Dear shareholder
5 Answering your questions
7 Fund performance
9 Report of independent public accountants
10 Portfolio of investments
23 Statement of net assets
24 Statement of operations
28 Statement of changes in net assets
35 Notes to financial statements
40 Financial highlights
<PAGE>
Dear
shareholder
[PHOTO OF RICHARD J. FRANKE APPEARS HERE]
After rising steeply throughout 1994, short-term interest rates fell in 1995.
Following an unprecedented series of seven rate increases between February 1994
and February 1995, the Fed responded to a climate of slowing economic growth and
diminished inflationary pressure by cutting rates three times over the past ten
months, the first reductions in nearly three years.
During market fluctuations such as these, Nuveen money market funds continue
to play an integral role in helping you reach your investment goals by offering
you an attractive level of tax-free current income, daily liquidity, and
diversification.
Overall, money market fund yields are lower than last year's rates due to the
effects of the Fed's actions. As of February 29, 1996, the seven-day annualized
yield for the money market funds covered in this report ranged from 2.75% to
2.87%. To match these yields, an investor in the 36% federal income tax bracket
would have had to earn at least 4.30% on taxable alternatives. For the state
money market funds, the addition of state taxes to the equation increases the
advantages provided by tax-free municipal bonds, raising the required taxable-
equivalent yield to a range of 4.62% to 4.95%.
As some of you may know, on June 30, 1996, I will be retiring as the Chairman
and Chief Executive Officer of John Nuveen & Co.
"Nuveen money
market funds
continue to play
an integral role in
helping you reach
your investment goals."
3
<PAGE>
Incorporated and as Chairman of the board of the Nuveen Funds. As I look back
over the 41 years I have spent at Nuveen, I'm proud to have been associated with
a firm that holds integrity, honesty, and value as the cornerstones of its
business. I'm confident that these traditions will continue to be the hallmarks
of Nuveen.
Over the past few years, I have been working closely with other Nuveen
managers to ensure that the company and the funds continue to be guided by
strong and talented management following my retirement. Timothy Schwertfeger,
who has been with Nuveen since 1977, has been named my successor as Chief
Executive Officer and Chairman of Nuveen. He currently serves as executive vice
president of Nuveen and president of the Nuveen Funds. I am very confident in
his abilities and the abilities of the entire Nuveen management team.
The transition in management has been well planned, and it will have no effect
on the way your funds are managed. Our management team is committed to
continuing Nuveen's successful tradition of prudent management, helping our
shareholders meet their need for tax-free investment income with a full range of
investment choices.
Our commitment to the municipal marketplace remains as strong as ever. Our
focus will continue to be on providing research-oriented management and
maintaining our leadership role in the municipal bond market. We anticipate many
more years of progress and accomplishment for our shareholders and our firm.
I'd like to take this occasion to thank you for selecting Nuveen Tax-Free
Money Market Fund investments. We appreciate your investment in Nuveen and we
look forward to reporting continued success in the years ahead.
Sincerely,
/s/ Richard J. Franke
Richard J. Franke
Chairman of the Board
April 15, 1996
4
<PAGE>
Answering your
questions
Tom Spalding, head of Nuveen's portfolio management team, discusses factors
affecting Nuveen's Tax-Free Money Market Funds and the outlook for 1996.
How did the
investment climate
over the past year
affect these funds?
In 1995, the combination of slow economic growth and low inflation created the
ideal environment for the Federal Reserve Board to cut interest rates. In July
and December 1995 and again at the end of January 1996, a succession of short-
term rate cuts contributed to the decline of municipal bond yields. Yet, as of
February 29, 1996, Nuveen money market funds continued to enjoy annualized
taxable-equivalent yields of 4.30% or better.
What are some of
the advantages of
investing in short-
term funds?
Money market fund investors receive attractive tax-free income compared with
other short-term vehicles, along with share price stability, daily liquidity,
and investment convenience. When combined with the flexibility of checkwriting
access to funds, money market funds remain a valuable and convenient investment
alternative.
5
<PAGE>
[PHOTO OF PAINTING APPEARS HERE]
Tom Spalding, head of Nuveen's portfolio management team, answers investors'
questions on developments in the municipal market.
What is Nuveen's
market outlook
for 1996?
Although inflation currently remains low and economic growth is moderating, we
continue to watch these factors for potential changes and impact on the bond
markets. During this election year, we are also closely monitoring any changes
in economic policy that may affect the municipal market. A combination of
various factors-such as cutbacks in federal spending, consumer confidence
levels, and concerns about corporate earnings projections-could keep the economy
growing at a slow pace throughout the year.
6
<PAGE>
NUVEEN TAX-FREE
RESERVES, INC.
Tax-Free Reserves
Shareholders continued to enjoy attractive tax-free dividends over the past 12
months, even as interest rates fell from levels of a year ago. On a
taxable-equivalent basis, the fund's current 7-day yield on net asset value was
4.30% on February 29, 1996.
[CHART APPEARS HERE]
<TABLE>
<CAPTION>
<S> <C>
3/95................................. 3.25
5/95................................. 3.66
7/95................................. 3.01
9/95................................. 3.21
11/95................................ 3.25
1/96................................. 2.87
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------
FUND HIGHLIGHTS 2/29/96
- --------------------------------------------
<S> <C>
Current 7-day SEC yield on NAV 2.75%
Taxable-equivalent yield on NAV* 4.30%
Federal tax rate 36.0%
Total net assets ($000) 339,662
- --------------------------------------------
</TABLE>
*An investor subject to the indicated income tax rate would need to receive this
return from a fully taxable investment to equal the stated 7-day annualized
yield on NAV.
NUVEEN CALIFORNIA TAX-FREE
MONEY MARKET FUND
California
Shareholders continued to enjoy attractive tax-free dividends over the past 12
months, even as interest rates fell from levels of a year ago. On a
taxable-equivalent basis, the fund's current 7-day yield on net asset value was
4.95% on February 29, 1996.
[CHART APPEARS HERE]
<TABLE>
<CAPTION>
<S> <C>
3/95................................. 3.31
5/95................................. 3.78
7/95................................. 2.98
9/95................................. 3.32
11/95................................ 3.29
1/96................................. 2.89
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------
FUND HIGHLIGHTS 2/29/96
- --------------------------------------------
<S> <C>
Current 7-day SEC yield on NAV 2.87%
Taxable-equivalent yield on NAV* 4.95%
Combined state and federal tax rate 42.0%
Total net assets ($000) 178,134
- --------------------------------------------
</TABLE>
*An investor subject to the indicated income tax rate would need to receive this
return from a fully taxable investment to equal the stated 7-day annualized
yield on NAV.
7
<PAGE>
NUVEEN MASSACHUSETTS TAX-FREE
MONEY MARKET FUND
Massachusetts
Shareholders continued to enjoy attractive tax-free dividends over the past 12
months, even as interest rates fell from levels of a year ago. On a
taxable-equivalent basis, the fund's current 7-day yield on net asset value was
4.90% on February 29, 1996.
[CHART APPEARS HERE]
<TABLE>
<CAPTION>
<S> <C>
3/95................................. 3.16
5/95................................. 3.62
7/95................................. 2.98
9/95................................. 3.11
11/95................................ 3.12
1/96................................. 2.84
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------
FUND HIGHLIGHTS 2/29/96
- --------------------------------------------
<S> <C>
Current 7-day SEC yield on NAV 2.77%
Taxable-equivalent yield on NAV* 4.90%
Federal tax rate 43.5%
Total net assets ($000) 68,080
- --------------------------------------------
</TABLE>
*An investor subject to the indicated income tax rate would need to receive this
return from a fully taxable investment to equal the stated 7-day annualized
yield on NAV.
NUVEEN NEW YORK TAX-FREE
MONEY MARKET FUND
New York
Shareholders continued to enjoy attractive tax-free dividends over the past 12
months, even as interest rates fell from levels of a year ago. On a
taxable-equivalent basis, the fund's current 7-day yield on net asset value was
4.62% on February 29, 1996.
[CHART APPEARS HERE]
<TABLE>
<CAPTION>
<S> <C>
3/95................................. 3.19
5/95................................. 3.67
7/95................................. 2.87
9/95................................. 3.17
11/95................................ 3.23
1/96................................. 3.18
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------
FUND HIGHLIGHTS 2/29/96
- --------------------------------------------
<S> <C>
Current 7-day SEC yield on NAV 2.75%
Taxable-equivalent yield on NAV* 4.62%
Combined state and federal tax rate 40.5%
Total net assets ($000) 32,203
- --------------------------------------------
</TABLE>
*An investor subject to the indicated income tax rate would need to receive this
return from a fully taxable investment to equal the stated 7-day annualized
yield on NAV.
8
<PAGE>
REPORT OF INDEPENDENT
PUBLIC ACCOUNTANTS
NUVEEN TAX-FREE MONEY MARKET FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
To the Board of Directors and Shareholders of
Nuveen Tax-Free Reserves, Inc.
Nuveen California Tax-Free Fund, Inc.,
Nuveen Tax-Free Money Market Fund, Inc.:
We have audited the accompanying statements of net assets of NUVEEN TAX-FREE
RESERVES, INC. (a Maryland Corporation), NUVEEN CALIFORNIA TAX-FREE FUND, INC.
(comprising the Nuveen California Tax-Free Money Market Fund) (a Maryland
Corporation) and NUVEEN TAX-FREE MONEY MARKET FUND, INC. (comprising the Nuveen
Massachusetts and New York Tax-Free Money Market Funds) (a Minnesota
Corporation), including the portfolios of investments, as of February 29, 1996,
and the related statements of operations for the year then ended, the statements
of changes in net assets for each of the two years in the period then ended and
the financial highlights for the periods indicated thereon. These financial
statements and financial highlights are the responsibility of the Funds'
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
February 29, 1996, by correspondence with the custodian and brokers. As to
securities purchased but not received, we requested confirmation from brokers
and, when replies were not received, we carried out other alternative auditing
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the net assets of each of the
respective funds constituting Nuveen Tax-Free Reserves, Inc., Nuveen California
Tax-Free Fund, Inc. and Nuveen Tax-Free Money Market Fund, Inc. as of February
29, 1996, the results of their operations for the year then ended, the changes
in their net assets for each of the two years in the period then ended, and the
financial highlights for the periods indicated thereon in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois,
April 8, 1996
9
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN TAX-FREE RESERVES, INC.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMORTIZED
AMOUNT DESCRIPTION RATINGS* COST
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ALABAMA - 6.2%
$ 7,215,000 Anniston Industrial Development Board (Union Foundry Company),
Variable Rate Demand Bonds, 3.400%, 6/01/05+ VMIG-1 $ 7,215,000
13,800,000 Birmingham Medical Clinic Board (University of Alabama Health
Services Foundation), Variable Rate Demand Bonds,
3.550%, 12/01/26+ A-1+ 13,800,000
- -----------------------------------------------------------------------------------------------------------------------
ARIZONA - 6.7%
10,000,000 Apache County Industrial Development, Pollution Control (Tucson
Electric), Variable Rate Demand Bonds, 3.450%, 10/01/21+ VMIG-1 10,000,000
7,600,000 Mesa Municipal Development Corporation, Special Tax, Series 1985,
Commercial Paper, 3.250%, 5/31/96 VMIG-1 7,600,000
5,000,000 Mesa Municipal Development Corporation, Special Tax, Series 1995,
Commercial Paper, 3.200%, 4/29/96 VMIG-1 5,000,000
- -----------------------------------------------------------------------------------------------------------------------
ARKANSAS - 2.8%
2,400,000 Arkansas Hospital Equipment Finance Authority (Washington Regional
Medical Center), Variable Rate Demand Bonds, 3.350%, 10/01/98+ VMIG-1 2,400,000
7,000,000 University of Arkansas-Board of Trustees (UAMS Campus-Series 1994),
Variable Rate Demand Bonds, 3.400%, 12/01/19+ VMIG-1 7,000,000
- -----------------------------------------------------------------------------------------------------------------------
CALIFORNIA - 2.1%
5,000,000 California School Cash Reserve Program, Series 1995 Notes,
4.750%, 7/03/96 MIG-1 5,016,318
2,000,000 Orange County Apartment Development (Monarch Bay Apartments
Project), Variable Rate Demand Bonds, 3.450%, 10/01/07+ A-1 2,000,000
- -----------------------------------------------------------------------------------------------------------------------
DELAWARE - 3.4%
11,682,500 New Castle County Economic Development, Revenue Refunding
(Henderson/McGuire Partners Project), Series 1994, Variable
Rate Demand Bonds, 3.450%, 8/15/20+ A-1 11,682,500
- -----------------------------------------------------------------------------------------------------------------------
DISTRICT OF COLUMBIA - 3.6%
9,000,000 District of Columbia General Obligation, General Fund Recovery,
Variable Rate Demand Bonds, 3.550%, 6/01/03+ A-1+ 9,000,000
3,210,000 District of Columbia (American University Project), Variable Rate
Demand Bonds, 3.300%, 10/01/15+ VMIG-1 3,210,000
- -----------------------------------------------------------------------------------------------------------------------
FLORIDA - 4.5%
4,210,000 Florida Municipal Power Agency, Initial Pooled Loan Program, Series
1995A, Commercial Paper, 3.150%, 5/24/96 A-1 4,210,000
3,100,000 Pasco Multi-Family Housing, Carlton Arms of Magnolia Valley,
Series 1985, Variable Rate Demand Bonds, 3.400%, 12/01/07+ VMIG-1 3,100,000
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MONEY MARKET FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMORTIZED
AMOUNT DESCRIPTION RATINGS* COST
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FLORIDA (CONTINUED)
$ 4,800,000 Sarasota County Public Hospital District (Sarasota Memorial Hospital), A-1 $ 4,800,000
Commercial Paper, 3.300%, 7/30/96
3,300,000 Sunshine State Governmental Financing Commission, Commercial
Paper, 3.200%, 5/14/96 VMIG-1 3,300,000
- -----------------------------------------------------------------------------------------------------------------------------------
GEORGIA - 3.9%
3,400,000 Georgia Municipal Gas Authority (Transco Portfolio Project),
Commercial Paper, 3.250%, 5/24/96 VMIG-1 3,400,000
10,000,000 Fulco Hospital Authority, Revenue Anticipation Certificates (St. Joseph's
Hospital of Atlanta Project), Commercial Paper, 3.300%, 4/09/96 VMIG-1 10,000,000
- -----------------------------------------------------------------------------------------------------------------------------------
HAWAII - 1.0%
3,400,000 Hawaii Department of Budget and Finance, Special Purpose (Adventist
Health System), Variable Rate Demand Bonds, 3.550%, 9/01/99+ A-1 3,400,000
- -----------------------------------------------------------------------------------------------------------------------------------
ILLINOIS - 15.6%
9,200,000 Illinois Development Finance Authority, Pollution Control
(Diamond-Star Motors Corporation), Variable Rate Demand Bonds,
3.550%, 12/01/08+ P-1 9,200,000
6,000,000 Illinois Educational Facilities Authority, Shedd Aquarium Society,
Series 1987B, Commercial Paper, 3.350%, 5/08/96 VMIG-1 6,000,000
3,300,000 Illinois Health Facilities Authority (Condell Memorial Hospital),
Variable Rate Demand Bonds, 3.600%, 11/01/05+ VMIG-1 3,300,000
5,000,000 Illinois Health Facilities Authority (Victory Health Services Project),
Series 1991, Commercial Paper, 3.200%, 3/20/96 VMIG-1 5,000,000
3,100,000 Chicago General Obligation Tender Notes, Series 1995-A, 3.750%,
10/31/96 (Mandatory put 5/01/96) VMIG-1 3,100,000
3,800,000 Chicago General Obligation, Variable Rate Demand Bonds,
3.900%, 1/01/10+ VMIG-1 3,800,000
12,700,000 Chicago O'Hare International Airport (American Airlines), Variable
Rate Demand Bonds, 3.550%, 12/01/17+ P-1 12,700,000
5,700,000 Decatur Water Bonds (New South Water Treatment), Series 1985,
Commercial Paper, 3.500%, 4/08/96 VMIG-1 5,700,000
4,300,000 Decatur Water Bonds (South Water Treatment), Series 1985,
Commercial Paper, 3.300%, 4/11/96 VMIG-1 4,300,000
- -----------------------------------------------------------------------------------------------------------------------------------
INDIANA - 2.5%
6,000,000 Indianapolis Economic Development (Yellow Freight), Commercial
Paper, 4.500%, 1/15/97 N/R 6,000,000
2,500,000 Indianapolis Economic Development (Children's Museum of
Indianapolis), Series 1995, Variable Rate Demand Bonds,
3.350%, 10/01/25+ A-1+ 2,500,000
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN TAX-FREE RESERVES, INC.--CONTINUED
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
PRINCIPAL AMORTIZED
AMOUNT DESCRIPTION RATINGS* COST
<C> <S> <C> <C>
- --------------------------------------------------------------------------------------------------------
IOWA - 2.1%
$ 4,250,000 Iowa School Corporation, Warrant Certificates, Series 1995-96A,
Municipal Note, 4.750%, 6/28/96 MIG-1 $ 4,261,967
2,900,000 Eddyville Pollution Control Heartland Lysine Inc., Variable Rate
Demand Bonds, 3.700%, 11/01/03+ N/R 2,900,000
- --------------------------------------------------------------------------------------------------------
KENTUCKY - 2.7%
9,005,000 Hancock County Industrial Development (Southwire Company Project),
Variable Rate Demand Bonds, 3.800%, 7/01/10+ N/R 9,005,000
- --------------------------------------------------------------------------------------------------------
LOUISIANA - 3.8%
13,000,000 Louisiana Recovery District, Sales Tax, Variable Rate Demand Bonds,
3.500%, 7/01/98+ VMIG-1 13,000,000
- --------------------------------------------------------------------------------------------------------
MASSACHUSETTS - 1.2%
4,200,000 Massachusetts Industrial Finance Agency (Showa Women's Institute/
Boston), Variable Rate Demand Bonds, 3.600%, 3/15/04+ VMIG-1 4,200,000
- --------------------------------------------------------------------------------------------------------
MICHIGAN - 2.5%
7,100,000 Michigan Job Development Authority, Limited Obligation
(Frankenmuth Bavarian Inn), Variable Rate Demand Bonds,
3.625%, 8/15/15+ A-1 7,100,000
1,370,000 Warren Economic Development Corporation, Limited Obligation
(The Prince Company--Michigan Division), Variable Rate Demand
Bonds, 3.600%, 11/01/99+ P-1 1,370,000
- --------------------------------------------------------------------------------------------------------
MINNESOTA - 2.6%
6,330,000 Bloomington Commercial Development (James Avenue Associates
Project), Variable Rate Demand Bonds, 3.400%, 12/01/15+ A-1+ 6,330,000
2,500,000 St. Paul Housing and Redevelopment Authority, District Heating,
Variable Rate Demand Bonds, 3.900%, 12/01/12+ A-1 2,500,000
- --------------------------------------------------------------------------------------------------------
MISSISSIPPI - 1.8%
6,200,000 Lawrence County Pollution Control (Georgia-Pacific Corp. Project),
Series 1995, Variable Rate Demand Bonds, 3.275%, 12/01/00+ Aa-3 6,200,000
- --------------------------------------------------------------------------------------------------------
MISSOURI - 2.7%
3,600,000 Missouri Environmental Improvement and Energy Resources Authority,
Pollution Control, Series 1985A (Union Electric Company),
Commercial Paper, 3.250%, 4/04/96 VMIG-1 3,600,000
5,600,000 Missouri Environmental Improvement and Energy Resources Authority,
Pollution Control (Union Electric Company), Commercial Paper,
3.200%, 5/09/96 VMIG-1 5,600,000
- --------------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
NUVEEN TAX-FREE MONEY MARKET FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
PRINCIPAL AMORTIZED
AMOUNT DESCRIPTION RATINGS* COST
- --------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
NEVADA - 2.1%
$ 7,000,000 Clark County Industrial Development, Refunding Bonds (Nevada Power
Company Project), Series 1995 C, Variable Rate Demand Bonds,
3.300%, 10/01/30+ A-1+ $ 7,000,000
- --------------------------------------------------------------------------------------------------------
NORTH CAROLINA - 3.5%
2,400,000 Wake County Industrial Facilities and Pollution Control Financing
Authority, Series 1990B, Commercial Paper, 3.400%, 4/10/96 P-1 2,400,000
6,630,000 Wake County Industrial Facilities and Pollution Control Financing
Authority, Series 1990A, Commercial Paper, 3.350%, 4/30/96 P-1 6,630,000
3,000,000 Wake County Industrial Facilities and Pollution Control Financing
Authority, Variable Rate Demand Bonds, 3.600%, 10/01/15+ VMIG-1 3,000,000
- --------------------------------------------------------------------------------------------------------
OHIO - 11.1%
9,200,000 Centerville Health Care (Bethany Lutheran Village Continuing Care
Facilities Expansion Project), Variable Rate Demand Bonds,
3.350%, 5/01/08+ VMIG-1 9,200,000
6,900,000 Cincinnati and Hamilton County Port Authority (Kenwood Office
Associates), Variable Rate Demand Bonds, 3.600%, 9/01/25+ A-1 6,900,000
3,795,000 Franklin County Hospital Facilities (Traditions at Mill Run),
Floating Rate Demand Bonds, 3.450%, 11/01/14+ N/R 3,795,000
2,080,000 Hamilton County Healthcare Revenue Bonds, Series 1995 (Community
Limited Care Dialysis Center Project), Variable Rate Demand
Bonds, 3.400%, 9/01/05+ N/R 2,080,000
8,300,000 Montgomery County (Miami Valley Hospital), Series C, Commercial
Paper, 3.800%, 4/04/96 VMIG-1 8,300,000
7,500,000 Summit County, Twinsburg City School District, Unlimited Tax,
General Obligation Improvement Notes, 4.500%, 6/06/96 N/R 7,513,769
- --------------------------------------------------------------------------------------------------------
TENNESSEE - 3.0%
6,900,000 Clarksville Public Building Authority, Pooled Financing,
Series 1994, Variable Rate Demand Bonds, 3.400%, 6/01/24+ A-1 6,900,000
3,000,000 Montgomery County Public Building Authority, Pooled Financing,
Series 1995, Variable Rate Demand Bonds, 3.400%, 3/01/25+ A-1 3,000,000
- --------------------------------------------------------------------------------------------------------
VIRGINIA - 2.7%
3,000,000 Albemarle County Industrial Development Authority (The University
of Virginia Health Services Foundation), Series 1996, Variable
Rate Demand Bonds, 3.350%, 2/01/26+ A-1 3,000,000
2,600,000 Norfolk Industrial Development Authority (Norfolk, Virginia Beach,
Portsmouth), Industrial Development, Variable Rate Demand Bonds,
5.363%, 11/01/04+ N/R 2,600,000
3,300,000 Richmond Industrial Development Authority (Richmond MSA),
Variable Rate Demand Bonds, 5.363%, 11/01/04+ N/R 3,300,000
- --------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN TAX-FREE RESERVES, INC.--CONTINUED
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
PRINCIPAL AMORTIZED
AMOUNT DESCRIPTION RATINGS* COST
<C> <S> <C> <C>
- ----------------------------------------------------------------------------------------------------------
WASHINGTON - 3.9%
$ 5,300,000 Washington Health Care Facilities Authority (Adventist Health
System West/Walla Walla General), Variable Rate Demand Bonds,
3.450%, 9/01/09+ A-1 $ 5,300,000
3,300,000 Washington Housing Finance Commission (Crista Ministries Project),
Series 1991B, Variable Rate Demand Bonds, 3.400%, 7/01/11+ VMIG-1 3,300,000
4,700,000 Washington Public Power Supply System (Nuclear Project 3), Revenue
Refunding, Series 1993-3A2, Variable Rate Demand Bonds,
3.200%, 7/01/18+ VMIG-1 4,700,000
- ----------------------------------------------------------------------------------------------------------
WISCONSIN - 0.8%
2,800,000 Wisconsin Health and Educational Facilities Authority (Alexian
Village of Milwaukee), Series 1988A, Commercial Paper,
3.350%, 4/10/96 VMIG-1 2,800,000
- ----------------------------------------------------------------------------------------------------------
$335,477,500 Total Investments - 98.8% 335,519,554
============----------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.2% 4,142,910
- ----------------------------------------------------------------------------------------------------------
Net Assets - 100% $339,662,464
==========================================================================================================
</TABLE>
* Ratings (not covered by the report of independent public accountants): Using
the higher of Standard & Poor's or Moody's rating.
N/R - Investment is not rated.
+ The security has a maturity of more than one year, but has variable rate and
demand features which qualify it as a short-term security. The rate disclosed is
that currently in effect. This rate changes periodically based on market
conditions or a specified market index.
See accompanying notes to financial statements.
14
<PAGE>
NUVEEN TAX-FREE MONEY MARKET FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
NUVEEN CALIFORNIA TAX-FREE MONEY MARKET FUND
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMORTIZED
AMOUNT DESCRIPTION RATINGS* COST
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 5,000,000 California Health Facilities Authority (Catholic Healthcare West), Series
1995B, Variable Rate Demand Bonds, 3.000%, 7/01/05+ VMIG-1 $ 5,000,000
2,600,000 California Health Facilities Authority (St. Joseph Health System), Series
1985-A, Variable Rate Demand Bonds, 3.150%, 7/01/13+ VMIG-1 2,600,000
2,000,000 California Health Facilities Authority (Sutter Health), Series 1990B,
Variable Rate Demand Bonds, 3.300%, 3/01/20+ VMIG-1 2,000,000
2,400,000 California Health Facilities Authority (St. Joseph Health System),
Series 1991-B, Variable Rate Demand Bonds, 3.100%, 7/01/09+ VMIG-1 2,400,000
7,000,000 California Pollution Control Finance Authority (Pacific Gas and Electric),
Series D 1988, Commercial Paper, 3.300%, 3/14/96 A-1 7,000,000
7,500,000 California Pollution Control Finance Authority (Shell Oil Company),
Variable Rate Demand Bonds, 3.150%, 10/01/11+ VMIG-1 7,500,000
3,000,000 California School Cash Reserve Program, Series 1995 Notes,
4.750%, 7/03/96 MIG-1 3,009,790
4,780,000 California State Revenue Anticipation Warrants, 1994 Series C,
5.750%, 4/25/96 Aaa 4,793,887
5,610,000 California Statewide Community Development Authority, Certificates of
Participation, Series 1993, Variable Rate Demand Bonds, 3.250%, 12/01/18+ A-1+ 5,610,000
3,250,000 Chico Multi-Family Housing (Sycamore Glen Project), Series 1995,
Variable Rate Demand Bonds, 3.550%, 4/07/14+ N/R 3,250,000
4,500,000 Contra Costa Multi-Family Mortgage Revenue Refunding (Delta Square
Project), Series 1990A,Variable Rate Demand Bonds, 3.150%, 8/01/07+ VMIG-1 4,500,000
5,000,000 Eastern Municipal Water District, Water and Sewer Revenue, Series 1993B,
Variable Rate Demand Bonds, 3.000%, 7/01/20+ VMIG-1 5,000,000
4,900,000 Grand Terrace Redevelopment Agency, Multi-Family Housing (Mount
Vernon Villas Project), Variable Rate Demand Bonds, 3.350%, 12/01/11+ A-1 4,900,000
3,000,000 Hayward Housing Authority, Multi-Family Mortgage, Revenue
Refunding, Series 1993A (Huntwood Terrace), Variable Rate Demand
Bonds, 3.600%, 3/01/27+ A-1 3,000,000
4,000,000 Hillsborough Certificates of Participation, Water and Sewer System
Project, Series 1995A, Variable Rate Demand Bonds, 3.750%, 6/01/15+ A-1 4,000,000
9,000,000 Kern Community College District, Certificates of Participation, Series
1995, Variable Rate Demand Bonds, 3.550%, 1/01/25+ A-2 9,000,000
8,000,000 Los Angeles County Metropolitan Transportation Authority, Second
Subordinate Sales Tax Revenue, Commercial Paper, 3.100%, 4/10/96 A-1 8,000,000
8,400,000 Monterey County Financing Authority (Reclamation and Distribution
Project), Series 1995A, Variable Rate Demand Bonds, 3.450%, 9/01/36+ VMIG-1 8,400,000
7,200,000 Oakland Certificates of Participation, Capital Improvement
Project, Variable Rate Demand Bonds, 3.400%, 12/01/15+ N/R 7,200,000
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN CALIFORNIA TAX-FREE MONEY MARKET FUND-CONTINUED
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMORTIZED
AMOUNT DESCRIPTION RATINGS* COST
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 7,900,000 Orange County Apartment Development (Monarch Bay Apartments
Project), Variable Rate Demand Bonds, 3.450%, 10/01/07+ A-1 $ 7,900,000
3,800,000 Orange County Apartment Development (Robinson Ranch Apartments
Project), Variable Rate Demand Bonds, 3.450%, 11/01/08+ VMIG-1 3,800,000
5,000,000 Orange County Apartment Development (Niguel Summit), Variable
Rate Demand Bonds, 3.200%, 11/01/09+ VMIG-1 5,000,000
7,000,000 Sacramento Municipal Utility District, Series I, Commercial Paper,
2.950%, 5/24/96 A-1+ 7,000,000
1,200,000 San Bernardino Multi-Family Housing (Castle Park Apartments),
Variable Rate Demand Bonds, 3.650%, 11/01/05+ VMIG-1 1,200,000
2,200,000 San Diego County Rincon Del Diablo Municipal Water District, Rincon
Public Facilities Corporation, Commercial Paper, 3.750%, 5/01/96 VMIG-1 2,200,000
3,000,000 San Diego Housing Authority, Multi-Family Housing, Revenue Refunding,
Series 1993-A (Carmel Del Mar Apartments), Variable
Rate Demand Bonds, 3.150%, 12/01/15+ A-1+ 3,000,000
7,000,000 San Dimas Industrial Development (Bausch & Lomb Incorporated),
Variable Rate Demand Bonds, 3.750%, 12/01/15+ N/R 7,000,000
7,600,000 Santa Ana Health Facilities Authority (Town & Country), Variable Rate
Demand Bonds, 3.250%, 10/01/20+ A-1 7,600,000
4,000,000 Santa Clara County Transit District Refunding Equipment, Trust
Certificates, Variable Rate Demand Bonds, 3.200%, 6/01/15+ VMIG-1 4,000,000
6,000,000 Santa Paula Public Financing Authority, Series 1996, Water System
Acquisition Project, Variable Rate Demand Bonds, 3.700%, 2/01/26+ A-1 6,000,000
5,000,000 Solano County Tax and Revenue Anticipation Notes, Series 1995-96,
4.500%, 11/01/96 MIG-1 5,020,958
4,000,000 Southeast Resource Recovery Facilities Authority, Series 1995A, Variable
Rate Demand Bonds, 3.300%, 12/01/18+ A-1 4,000,000
6,400,000 Torrance Hospital (Little Company of Mary Hospital-Torrance
Memorial Hospital), Variable Rate Demand Bonds, 3.900%, 2/01/22+ A-2 6,400,000
2,640,000 Vista Multi-Family Housing (Shadowridge Apartments), Variable Rate
Demand Bonds, 3.050%, 5/01/05+ A-1+ 2,640,000
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
NUVEEN TAX-FREE MONEY MARKET FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMORTIZED
AMOUNT DESCRIPTION RATINGS* COST
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 4,500,000 Visalia Public Finance Authority, Certificates of Participation, 1991
Convention Center Expansion Project, Variable Rate Demand
Bonds, 3.350%, 12/01/16+ VMIG-1 $ 4,500,000
3,000,000 Washington Township Hospital District, 1984 Issue A, Variable Rate
Demand Bonds, 3.450%, 1/01/16+ VMIG-1 3,000,000
- ------------------------------------------------------------------------------------------------------------------------------------
$ 177,380,000 Total Investments - 99.6% 177,424,635
- ------------------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 0.4% 709,596
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $ 178,134,231
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Ratings (not covered by the report of independent public accountants): Using
the higher of Standard & Poor's or Moody's rating.
N/R - Investment is not rated.
+ The security has a maturity of more than one year, but has variable rate and
demand features which qualify it as a short-term security. The rate disclosed
is that currently in effect. This rate changes periodically based on market
conditions or a specified market index.
See accompanying notes to financial statements.
17
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN MASSACHUSETTS TAX-FREE MONEY MARKET FUND
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMORTIZED
AMOUNT DESCRIPTION RATINGS* COST
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 2,000,000 Massachusetts Municipal Wholesale Electric Company, Series 1994,
Variable Rate Demand Bonds, 3.050%, 7/01/19+ A-1+ $ 2,000,000
2,200,000 Massachusetts General Obligation Notes, Series 1995A,
4.250%, 6/12/96 MIG-1 2,203,888
1,000,000 Massachusetts Dedicated Income Tax, Series 1990E, Variable Rate
Demand Bonds, 3.350%, 12/01/97+ VMIG-1 1,000,000
3,500,000 Massachusetts Health and Educational Facilities Authority (Fallon
Health Care), Variable Rate Demand Bonds, 3.400%, 4/14/98+ A-1+ 3,500,000
1,420,000 Massachusetts Health and Educational Facilities Authority (Newbury
College), Variable Rate Demand Bonds, 3.100%, 11/01/18+ N/R 1,420,000
700,000 Massachusetts Health and Educational Facilities Authority (Capital Asset
Program), Variable Rate Demand Bonds, 3.700%, 1/01/35+ VMIG-1 700,000
3,500,000 Massachusetts Health and Educational Facilities Authority (Harvard
University), Variable Rate Demand Bonds, 2.800%, 8/01/17+ VMIG-1 3,500,000
2,500,000 Massachusetts Health and Educational Facilities Authority (Brigham
and Women's Hospital), Variable Rate Demand Bonds, 3.500%, 7/01/17+ VMIG-1 2,500,000
1,000,000 Massachusetts Health and Educational Facilities Authority (M.I.T.
Project), Variable Rate Demand Bonds, 2.800%, 7/01/21+ VMIG-1 1,000,000
2,000,000 Massachusetts Health and Educational Facilities Authority (Wellesley
College), Series E, Variable Rate Demand Bonds, 2.700%, 7/01/22+ VMIG-1 2,000,000
800,000 Massachusetts Housing Finance Agency, Multi-Family Revenue Refunding
Bonds, Series 1995A, Variable Rate Demand Bonds, 3.300%, 12/01/25+ VMIG-1 800,000
1,145,000 Massachusetts Industrial Finance Agency (Jencoat/Levy Realty Trust),
Variable Rate Demand Bonds, 4.075%, 10/06/99+ N/R 1,145,000
1,000,000 Massachusetts Industrial Finance Agency (Nova Realty Trust 1994
Refunding), Variable Rate Demand Bonds, 3.150%, 12/01/02+ P-1 1,000,000
2,600,000 Massachusetts Industrial Finance Agency (Manhasset Bay Associates,
1985 Cambridge Issue), Variable Rate Demand Bonds, 3.300%, 10/01/10+ Aa-3 2,600,000
2,300,000 Massachusetts Industrial Finance Agency (Holyoke Water Power Company
Project), Variable Rate Demand Bonds, 2.950%, 5/01/22+ VMIG-1 2,300,000
2,000,000 Massachusetts Health and Educational Facilities Authority (Community
Health Center Capital Fund), Variable Rate Demand Bonds, 3.250%,
3/01/15+ A-2 2,000,000
2,200,000 Massachusetts Industrial Finance Agency, Pollution Control (New
England Power Company Project), Variable Rate DemandBonds, 3.350%,
3/01/18+ A-1 2,200,000
3,400,000 Massachusetts Port Authority, Multimodal Series 1995A, Variable Rate
Demand Bonds, 3.350%, 7/01/15+ VMIG-1 3,400,000
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE>
NUVEEN TAX-FREE MONEY MARKET FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMORTIZED
AMOUNT DESCRIPTION RATINGS* COST
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
$1,900,000 Massachusetts Industrial Finance Agency (WGBH Educational
Foundation Project), Adjustable Rate Bonds, 3.150%, 10/01/09+ VMIG-1 $1,900,000
1,500,000 Massachusetts Industrial Finance Agency (The Williston Northampton
School), Variable Rate Demand Bonds, 3.050%, 4/01/24+ N/R 1,500,000
3,400,000 Massachusetts Industrial Finance Agency (Showa Women's Institute/
Boston), Variable Rate Demand Bonds, 3.600%, 3/15/04+ VMIG-1 3,400,000
1,000,000 Massachusetts Industrial Finance Agency (Emerson College), Series 1995,
Variable Rate Demand Bonds, 3.400%, 1/01/15+ N/R 1,000,000
2,500,000 Massachusetts Industrial Finance Agency (Edgewood Retirement
Community Project), Series 1995C, Variable Rate Demand Bonds,
3.300%, 11/15/25+ VMIG-1 2,500,000
1,000,000 Massachusetts Industrial Finance Agency (Lower Mills Associates LP),
3.400%, 12/01/20+ N/R 1,000,000
3,000,000 Massachusetts Water Resources Authority, Series 1994, Commercial
Paper, 3.300%, 3/29/96 A-1+ 3,000,000
1,500,000 Boston Water and Sewer Commission, Series 1994A, General Revenue
Senior Series, Variable Rate Demand Bonds, 2.900%, 11/01/24+ VMIG-1 1,500,000
600,000 Brookline General Obligation Notes, Unlimited Tax,
4.650%, 2/15/97 (WI) Aaa 608,298
550,000 Cape Cod Regional Transit Authority, Revenue Anticipation Notes,
Unlimited Tax, 4.100%, 7/05/96 N/R 550,811
1,160,000 Franklin General Obligation Notes, Unlimited Tax, 4.500%, 11/15/96 Aaa 1,165,582
2,600,000 Lincoln Bond Anticipation Notes, Unlimited Tax, 4.000%, 7/05/96 Aa-1 2,602,984
1,000,000 Medford Bond Anticipation Notes, 4.100%, 5/15/96 N/R 1,000,696
1,950,000 Mendon Upton Regional School District, Bond Anticipation Notes,
Unlimited Tax, 3.430%, 2/28/97 (WI) N/R 1,952,418
2,986,000 Merrimac Valley Regional Transit Authority, Revenue Anticipation Notes,
Unlimited Tax, 3.880%, 4/26/96 N/R 2,987,460
900,000 New Bedford Industrial Development (Cliftex Corporation), Series 1989,
Variable Rate Demand Bonds, 4.075%, 10/01/97+ N/R 900,000
2,500,000 Salem Massachusetts Bond Anticipation Notes, 4.000%, 7/01/96 A-1 2,503,050
800,000 Shrewsbury General Obligation Notes, Series 1996, 3.500%, 2/01/97 Aaa 801,776
2,000,000 West Bridgewater Bond Anticipation Notes, Unlimited Tax,
4.000%, 7/24/96 N/R 2,004,933
378,000 West Tisbury General Obligation Notes, Unlimited Tax,
4.900%, 1/01/97 Aaa 381,061
610,000 Westfield General Obligation Notes, Series 1995, 5.800%, 11/15/96 Aaa 618,594
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN MASSACHUSETTS TAX-FREE MONEY MARKET FUND-CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT DESCRIPTION RATINGS* COST
<S> <C> <C> <C>
$ 1,000,000 Puerto Rico Industrial Medical Educational and Environmental
- ----------- Authority (Ana G. Mendez Educational Foundation, FEAGM Project),
Variable Rate Demand Bonds, 3.350%, 12/01/15+ A-1+ $ 1,000,000
---------------------------------------------------------------------------------------------
$70,099,000 Total Investments - 103.0% 70,146,551
=========== ---------------------------------------------------------------------------------------------
Other Assets Less Liabilities - (3.0)% (2,066,551)
---------------------------------------------------------------------------------------------
Net Assets - 100% $68,080,000
=============================================================================================
</TABLE>
* Ratings (not covered by the report of independent public accountants): Using
the higher of Standard & Poor's or Moody's rating.
N/R = Investment is not rated.
+ The security has a maturity of more than one year, but has variable rate and
demand features which qualify it as a short=term security. The rate
disclosed is that currently in effect. This rate changes periodically based on
market conditions or a specified market index.
(WI) Security purchased on a when=issued basis (note 1).
See accompanying notes to financial statements.
20
<PAGE>
NUVEEN TAX-FREE MONEY MARKET FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
NUVEEN NEW YORK TAX-FREE MONEY MARKET FUND
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
PRINCIPAL AMORTIZED
AMOUNT DESCRIPTION RATINGS* COST
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$1,400,000 New York City Fiscal 94 Series A-10, Variable Rate Demand Bonds,
3.450%, 8/01/16+ VMIG-1 $1,400,000
300,000 New York City Housing Development Corporation (Columbus Gardens
Project), Variable Rate Demand Bonds, 3.150%, 2/01/07+ A-1 300,000
1,000,000 New York City Industrial Development Agency (LaGuardia Associates
Project), Variable Rate Demand Bonds, 3.150%, 12/01/15+ A-1 1,000,000
1,100,000 New York City Trust for Cultural Resources (Guggenheim Foundation),
Variable Rate Demand Bonds, 3.400%, 12/01/15+ VMIG-1 1,100,000
1,300,000 New York City Trust For Cultural Resources, Series 1985 (Carnegie
Hall), Variable Rate Demand Bonds, 3.200%, 12/01/15+ VMIG-1 1,300,000
500,000 Dormitory Authority of the State of New York, Second Short-Term
Revenue Notes, 1989 Series A, Commercial Paper, 3.650%, 3/12/96 A-1 500,000
800,000 Dormitory Authority of the State of New York (St. Francis Center at the
Knolls, Inc.), Variable Rate Demand Bonds, 3.300%, 7/01/23+ VMIG-1 800,000
1,300,000 Dormitory Authority of the State of New York (Oxford University Press),
Series 1993, Variable Rate Demand Bonds, 3.250%, 7/01/23+ VMIG-1 1,300,000
1,400,000 Dormitory Authority of the State of New York (Beverwyck Inc), Series
1995, Variable Rate Demand Bonds, 3.050%, 7/01/25+ VMIG-1 1,400,000
1,400,000 New York State Energy Research and Development Authority, Pollution
Control (Central Hudson Gas and Electric Corporation), Variable Rate
Demand Bonds, 3.050%, 11/01/20+ A-1+ 1,400,000
1,400,000 New York State Energy Research and Development Authority, Pollution
Control (Niagara Mohawk Corporation), Variable Rate Demand Bonds,
3.850%, 3/01/27+ N/R 1,400,000
1,100,000 New York State Environmental Facilities Corporation (General Electric
Company), Commercial Paper, 3.450%, 3/12/96 A-1+ 1,100,000
1,400,000 New York State Housing Finance Agency (Normandie Court), Variable
Rate Demand Bonds, 3.100%, 5/15/15+ VMIG-1 1,400,000
900,000 New York State Housing Finance Agency (Mt. Sinai School of Medicine),
Series 1984-A, Variable Rate Demand Bonds, 3.150%, 11/01/14+ VMIG-1 900,000
885,000 New York State Job Development Authority, Series 1984E, Variable Rate
Demand Bonds, 3.650%, 3/01/99+ MIG-1 885,000
1,400,000 New York Local Government Assistance Corporation, Series 1995E,
Variable Rate Demand Bonds, 3.150%, 4/01/25+ VMIG-1 1,400,000
1,300,000 New York State Medical Care Facilities Finance Agency (Lenox Hill
Hospital), Variable Rate Demand Bonds, 3.100%, 11/01/08+ VMIG-1 1,300,000
1,300,000 New York State Medical Care Facilities Finance Agency (Children's
Hospital of Buffalo), Variable Rate Demand Bonds, 3.100%, 11/01/05+ VMIG-1 1,300,000
900,000 New York State Thruway Authority, Variable Rate Demand Bonds,
3.350%, 1/01/24+ VMIG-1 900,000
1,223,387 Babylon Bond Anticipation Notes, 1995 Series A, 3.850%, 10/30/96 N/R 1,226,724
1,000,000 Buffalo Revenue Anticipation Notes, 4.200%, 7/16/96 VMIG-1 1,002,938
1,400,000 Chautauqua County General Obligation, Tax Anticipation Notes,
4.000%, 12/20/96 N/R 1,407,672
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
21
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN NEW YORK TAX-FREE MONEY MARKET FUND-CONTINUED
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
PRINCIPAL AMORTIZED
AMOUNT DESCRIPTION RATINGS* COST
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 1,000,000 Guilderland Industrial Development Agency (Northeastern Industrial
Park), Series 1993A, Variable Rate Demand Bonds,
3.150%, 12/01/08+ P-1 $1,000,000
1,400,000 Monroe County Revenue Anticipation Notes, 1995 General Obligation,
4.500%, 3/14/96 AA 1,400,368
1,200,000 Nassau County Industrial Development Agency (Cold Spring Harbor),
Variable Rate Demand Bonds, 3.450%, 7/01/19+ A-1+ 1,200,000
900,000 Suffolk County Industrial Development Agency (Phototronics
Corporate Facility), Variable Rate Demand Bonds, 3.300%, 1/01/98+ VMIG-1 900,000
1,400,000 Triborough Bridge and Tunnel Authority, Special Obligation, Series 1994,
Variable Rate Demand Bonds, 3.250%, 1/01/24+ MIG-1 1,400,000
1,300,000 Yonkers Industrial Development Agency (Civic Facility), Series 1989,
Variable Rate Demand Bonds, 3.450%, 7/01/19+ VMIG-1 1,300,000
- ----------------------------------------------------------------------------------------------------------------
$31,908,387 Total Investments - 99.1% 31,922,702
===========-----------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 0.9% 279,872
- ----------------------------------------------------------------------------------------------------------------
Net Assets - 100% $32,202,574
================================================================================================================
</TABLE>
* Ratings (not covered by the report of independent public accountants): Using
the higher of Standard & Poor's or Moody's rating.
N/R - Investment is not rated.
+ The security has a maturity of more than one year, but has variable rate and
demand features which qualify it as a short-term security. The rate
disclosed is that currently in effect. This rate changes periodically based on
market conditions or a specified market index.
See accompanying notes to financial statements.
22
<PAGE>
STATEMENT OF NET ASSETS NUVEEN TAX-FREE MONEY MARKET FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
RESERVES CA MA NY
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Investments in short-term municipal securities,
at amortized cost (note 1) $335,519,554 $177,424,635 $70,146,551 $31,922,702
Cash 3,847,244 312,071 220,655 137,606
Receivables:
Interest 1,304,883 827,401 474,222 135,425
Investments sold -- 100,000 -- 115,000
Other assets 39,995 24,066 12,555 9,974
------------ ------------ ----------- -----------
Total assets 340,711,676 178,688,173 70,853,983 32,320,707
------------ ------------ ----------- -----------
LIABILITIES
Payable for investments purchased -- -- 2,561,026 --
Accrued expenses:
Management fees (note 4) 135,475 58,287 22,560 10,068
Other 170,749 77,370 32,017 38,066
Dividends payable 742,988 418,285 158,380 69,999
------------ ------------ ----------- -----------
Total liabilities 1,049,212 553,942 2,773,983 118,133
------------ ------------ ----------- -----------
Net assets applicable to shares outstanding (note 3) $339,662,464 $178,134,231 $68,080,000 $32,202,574
============ ============ =========== ===========
Shares outstanding:
Service Plan series -- 70,721,933 38,250,579 554,459
Distribution Plan series -- 73,020,093 26,279,242 31,631,448
Institutional series -- 34,392,205 3,550,179 16,667
------------ ------------ ----------- -----------
Total shares outstanding 339,662,464 178,134,231 68,080,000 32,202,574
============ ============ =========== ===========
Net asset value, offering and redemption price per share
(net assets divided by shares outstanding) $ 1.00 $ 1.00 $ 1.00 $ 1.00
============ ============ =========== ===========
</TABLE>
See accompanying notes to financial statements.
23
<PAGE>
STATEMENT OF OPERATIONS
Year ended February 29, 1996
<TABLE>
<CAPTION>
RESERVES
<S> <C>
INVESTMENT INCOME
Tax-exempt interest income (note 1) $13,393,726
-----------
Expenses:
Management fees (note 4) 1,685,865
12b-1 expense (note 4) 145,504
Shareholders' servicing agent fees and expenses 461,510
Custodian's fees and expenses 98,054
Directors' fees and expenses (note 4) 4,173
Professional fees 22,196
Shareholders' reports-printing and mailing expenses 181,747
Federal and state registration fees 15,054
Other expenses 34,254
-----------
Total expenses before expense reimbursement 2,648,357
Expense reimbursement from investment adviser (note 4) (119,509)
-----------
Net expenses 2,528,848
-----------
Net investment income 10,864,878
Net gain (loss) from investment transactions -
-----------
Net increase in net assets from operations $10,864,878
===========
</TABLE>
See accompanying notes to financial statements.
24
<PAGE>
NUVEEN TAX-FREE MONEY MARKET FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
CALIFORNIA MONEY MARKET
-----------------------------------------------------------------------
Service Distribution Institutional
Plan series Plan series series Total
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Tax-exempt interest income (note 1) $ 2,249,638 $ 2,663,057 $ 1,426,639 $ 6,339,334
------------ ------------- ------------- -------------
Expenses:
Management fees (note 4) 234,499 276,546 148,326 659,371
12b-1 expense (note 4) 53,171 49,929 - 103,100
Shareholders' servicing agent fees and expenses 4,707 41,838 350 46,895
Custodian's fees and expenses 18,090 23,545 13,076 54,711
Directors' fees and expenses (note 4) 1,164 1,459 832 3,455
Professional fees 6,555 7,421 3,939 17,915
Shareholders' reports--printing and mailing expenses 3,829 21,456 200 25,485
Federal and state registration fees 1,504 538 - 2,042
Other expenses 4,140 5,218 3,945 13,303
------------ ------------- ------------- -------------
Total expenses before expense reimbursement 327,659 427,950 170,668 926,277
Expense reimbursement from investment adviser (note 4) (11,469) (47,885) - (59,354)
------------ ------------- ------------- -------------
Net expenses 316,190 380,065 170,668 866,923
------------ ------------- ------------- -------------
Net investment income 1,933,448 2,282,992 1,255,971 5,472,411
Net gain (loss) from investment transactions - - - -
------------ ------------- ------------- -------------
Net increase in net assets from operations $ 1,933,448 $ 2,282,992 $ 1,255,971 $ 5,472,411
------------ ------------- ------------- -------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
25
<PAGE>
STATEMENT OF OPERATIONS
Year ended February 29, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
MASSACHUSETTS MONEY MARKET
------------------------------------------------------------------------
Service Distribution Institutional
Plan series Plan series Series Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Tax-exempt interest income (note 1) $ 1,139,943 $ 904,774 $ 124,483 $ 2,169,200
------------ ---------- ----------- -------------
Expenses:
Management fees (note 4) 123,420 97,516 13,492 234,428
12b-1 expense (note 4) 30,649 21,424 - 52,073
Shareholders' servicing agent fees and expenses 801 32,367 747 33,915
Custodian's fees and expenses 22,234 22,962 2,566 47,762
Directors' fees and expenses (note 4) 1,237 1,029 137 2,403
Professional fees 8,515 6,795 1,010 16,320
Shareholders' reports--printing and mailing expenses 261 18,368 277 18,906
Federal and state regulation fees 3,358 1,165 626 5,149
Other expenses 3,824 2,433 415 6,672
------------ ---------- ----------- -------------
Total expenses before expense reimbursement 194,299 204,059 19,270 417,628
Expense reimbursement from investment adviser (note 4) (24,442) (70,083) (919) (95,444)
------------ ---------- ----------- -------------
Net expenses 169,857 133,976 18,351 322,184
------------ ---------- ----------- -------------
Net investment income 970,086 770,798 106,132 1,847,016
Net gain (loss) from investment transactions - - - -
------------ ---------- ----------- -------------
Net increase in net assets from operations $ 970,086 $ 770,798 $ 106,132 $ 1,847,016
============ ========== =========== =============
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
26
<PAGE>
NUVEEN TAX-FREE MONEY MARKET FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
NEW YORK MONEY MARKET
----------------------------------------------------------------------
Service Distribution Institutional
Plan series Plan series series Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Tax-exempt interest income (note 1) $ 18,844 $ 1,135,683 $ 624 $ 1,155,151
------------ ------------ ------------ ------------
Expenses:
Management fees (note 4) 2,014 121,439 66 123,519
12b-1 expense (note 4) 299 13,414 - 13,713
Shareholders' servicing agent fees and expenses 1,141 29,335 22 30,498
Custodian's fees and expenses 933 57,461 32 58,426
Directors' fees and expenses (note 4) 7 371 - 378
Professional fees 263 16,033 9 16,305
Shareholders' reports--printing and mailing expenses 2,679 43,448 73 46,200
Federal and state registration fees 2,293 631 26 2,950
Other expenses 58 3,145 1 3,204
------------ ------------ ------------ ------------
Total expenses before expense reimbursement 9,687 285,277 229 295,193
Expense reimbursement from investment adviser (note 4) (6,908) (118,284) (138) (125,330)
------------ ------------ ------------ ------------
Net expenses 2,779 166,993 91 169,863
------------ ------------ ------------ ------------
Net investment income 16,065 968,690 533 985,288
Net gain (loss) from investment transactions - - - -
------------ ------------ ------------ ------------
Net increase in net assets from operations $ 16,065 $ 968,690 $ 533 $ 985,288
------------ ------------ ------------ ------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
27
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
RESERVES
------------- -------------
Year ended Year ended
2/29/96 2/28/95
------------- -------------
<S> <C> <C>
OPERATIONS
Net investment income $ 10,864,878 $ 8,795,175
Net realized gain (loss) from investment transactions -- --
------------- -------------
Net increase in net assets from operations 10,864,878 8,795,175
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS (note 1) (10,864,878) (8,795,175)
------------- -------------
COMMON SHARE TRANSACTIONS
(at constant net asset value of $1 per share) (note 1)
Net proceeds from sale of shares 808,776,352 657,011,312
Net asset value of shares issued to shareholders due
to reinvestment of distributions from net investment
income and from net realized gains from investment
transactions 10,240,006 7,787,100
------------- -------------
819,016,358 664,798,412
Cost of shares redeemed (830,960,291) (717,393,211)
------------- -------------
Net increase (decrease) in net assets derived from
Common share transactions (11,943,933) (52,594,799)
Net assets at the beginning of year 351,606,397 404,201,196
------------- -------------
Net assets at the end of year $ 339,662,464 $ 351,606,397
============= =============
</TABLE>
See accompanying notes to financial statements.
28
<PAGE>
NUVEEN TAX-FREE MONEY MARKET FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
<TABLE>
<CAPTION>
CALIFORNIA MONEY MARKET
--------------------------------------------------------------
Year ended February 29, 1996
--------------------------------------------------------------
Service Distribution Institutional
Plan series Plan series series Total
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
OPERATIONS
Net investment income.................................... $ 1,933,448 $ 2,282,992 $ 1,255,971 $ 5,472,411
Net realized gain (loss) from investment transactions.... -- -- -- --
------------- ------------- ------------- -------------
Net increase in net assets from operations.............. 1,933,448 2,282,992 1,255,971 5,472,411
------------- ------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS (note 1)................... (1,933,448) (2,282,992) (1,255,971) (5,472,411)
------------- ------------- ------------- -------------
COMMON SHARE TRANSACTIONS
(at constant net asset value of $1 per share) (note 1)
Net proceeds from sale of shares......................... 137,297,132 130,907,267 212,399,556 480,603,955
Net asset value of shares issued to shareholders due to
reinvestment of distributions from net investment
income and from net realized gains from investment
transactions............................................ 1,633,671 1,762,239 3,093 3,399,003
------------- ------------- ------------- -------------
138,930,803 132,669,506 212,402,649 484,002,958
Cost of shares redeemed (109,980,788) (126,806,592) (228,782,833) (465,570,213)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets derived from
Common share transactions........................... 28,950,015 5,862,914 (16,380,184) 18,432,745
Net assets at the beginning of year...................... 41,771,918 67,157,179 50,772,389 159,701,486
------------- ------------- ------------- -------------
Net assets at the end of year............................ $ 70,721,933 $ 73,020,093 $ 34,392,205 $ 178,134,231
============= ============= ============= =============
</TABLE>
See accompanying notes to financial statements.
29
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
CALIFORNIA MONEY MARKET
----------------------------------------------------------------------
Year ended February 28, 1995
----------------------------------------------------------------------
Service Distribution Institutional
Plan series Plan series series Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income $ 2,628,687 $ 1,814,647 $ 1,366,100 $ 5,809,434
Net realized gain (loss) from investment transactions (11,576) (4,489) (2,299) (18,364)
------------- ------------- ------------- -------------
Net increase in net assets from operations 2,617,111 1,810,158 1,363,801 5,791,070
------------- ------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS (note 1) (2,617,111) (1,810,158) (1,363,801) (5,791,070)
------------- ------------- ------------- -------------
COMMON SHARE TRANSACTIONS
(at constant net asset value of $1 per share) (note 1)
Net proceeds from sale of shares 208,318,412 113,315,156 247,997,081 569,630,649
Net asset value of shares issued to shareholders due to
reinvestment of distributions from net investment
income and from net realized gains from investment
transactions 2,983,786 1,322,451 7,041 4,313,278
------------- ------------- ------------- -------------
211,302,198 114,637,607 248,004,122 573,943,927
Cost of shares redeemed (584,768,062) (119,860,860) (229,530,966) (934,159,888)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets derived from
Common share transactions (373,465,864) (5,223,253) 18,473,156 (360,215,961)
Net assets at the beginning of year 415,237,782 72,380,432 32,299,233 519,917,447
------------- ------------- ------------- -------------
Net assets at the end of year $ 41,771,918 $ 67,157,179 $ 50,772,389 $ 159,701,486
============= ============= ============= =============
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
30
<PAGE>
NUVEEN TAX-FREE MONEY MARKET FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
MASSACHUSETTS MONEY MARKET
---------------------------------------------------------------------
Year ended February 29, 1996
---------------------------------------------------------------------
Service Distribution Institutional
Plan series Plan series series Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income $ 970,086 $ 770,798 $ 106,132 $ 1,847,016
Net realized gain (loss) from investment transactions - - - -
------------ ------------ ------------ ------------
Net increase in net assets from operations 970,086 770,798 106,132 1,847,016
------------ ------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS (note 1) (970,086) (770,798) (106,132) (1,847,016)
------------ ------------ ------------ ------------
COMMON SHARE TRANSACTIONS
(at constant net asset value of $1 per share) (note 1)
Net proceeds from sale of shares 77,847,781 24,524,563 16,474,350 118,846,694
Net asset value of shares issued to shareholders due to
reinvestment of distributions from net investment
income and from net realized gains from investment
transactions 960,638 758,160 46,176 1,764,974
------------ ------------ ------------ ------------
78,808,419 25,282,723 16,520,526 120,611,668
Cost of shares redeemed (68,289,392) (23,240,661) (14,005,907) (105,535,960)
------------ ------------ ------------ ------------
Net increase (decrease) in net assets derived from
Common share transactions 10,519,027 2,042,062 2,514,619 15,075,708
Net assets at the beginning of year 27,731,552 24,237,180 1,035,560 53,004,292
------------ ------------ ------------ ------------
Net assets at the end of year $ 38,250,579 $ 26,279,242 $ 3,550,179 $ 68,080,000
============ ============ ============ ============
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
31
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
MASSACHUSETTS MONEY MARKET
---------------------------------------------------------------------
Year ended February 28, 1995
---------------------------------------------------------------------
Service Distribution Institutional
Plan series Plan series series Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income $ 1,007,902 $ 699,762 $ 101,590 $ 1,809,254
Net realized gain (loss) from investment transactions (1,430) (1,013) (60) (2,503)
------------- ------------ ------------ -------------
Net increase in net assets from operations 1,006,472 698,749 101,530 1,806,751
------------- ------------ ------------ -------------
DISTRIBUTIONS TO SHAREHOLDERS (note 1) (1,006,472) (698,749) (101,530) (1,806,751)
------------- ------------ ------------ -------------
COMMON SHARE TRANSACTIONS
(at constant net asset value of $1 per share) (note 1)
Net proceeds from sale of shares 126,292,160 26,877,207 10,226,869 163,396,236
Net asset value of shares issued to shareholders due to
reinvestment of distributions from net investment income
and from net realized gains from investment transactions 982,397 655,827 5,596 1,643,820
------------- ------------ ------------ -------------
127,274,557 27,533,034 10,232,465 165,040,056
Cost of shares redeemed (138,119,127) (31,068,859) (12,602,539) (181,790,525)
------------- ------------ ------------ -------------
Net increase (decrease) in net assets derived from
Common share transactions (10,844,570) (3,535,825) (2,370,074) (16,750,469)
Net assets at the beginning of year 38,576,122 27,773,005 3,405,634 69,754,761
------------- ------------ ------------ -------------
Net assets at the end of year $ 27,731,552 $ 24,237,180 $ 1,035,560 $ 53,004,292
============= ============ ============ =============
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
32
<PAGE>
NUVEEN TAX-FREE MONEY MARKET FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
NEW YORK MONEY MARKET
---------------------------------------------------------------------
Year ended February 29, 1996
---------------------------------------------------------------------
Service Distribution Institutional
Plan series Plan series series Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income $ 16,065 $ 968,690 $ 533 $ 985,288
Net realized gain (loss) from investment transactions - - - -
--------- ------------ -------- ------------
Net increase in net assets from operations 16,065 968,690 533 985,288
--------- ------------ -------- ------------
DISTRIBUTIONS TO SHAREHOLDERS (note 1) (16,065) (968,690) (533) (985,288)
--------- ------------ -------- ------------
COMMON SHARE TRANSACTIONS
(at constant net asset value of $1 per share) (note 1)
Net proceeds from sale of shares 364,272 36,230,907 - 36,595,179
Net asset value of shares issued to shareholders due to
reinvestment of distributions from net investment
income and from net realized gains from investment
transactions 13,053 942,307 - 955,360
--------- ------------ -------- ------------
377,325 37,173,214 - 37,550,539
Cost of shares redeemed (462,939) (35,339,438) - (35,802,377)
--------- ------------ -------- ------------
Net increase (decrease) in net assets derived from
Common share transactions (85,614) 1,833,776 - 1,748,162
Net assets at the beginning of year 640,073 29,797,672 16,667 30,454,412
--------- ------------ -------- ------------
Net assets at the end of year $ 554,459 $ 31,631,448 $ 16,667 $ 32,202,574
========= ============ ======== ============
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
33
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
NEW YORK MONEY MARKET
-----------------------------------------------------------------------
Year ended February 28, 1995
-----------------------------------------------------------------------
Service Distribution Institutional
Plan series Plan series series Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income $ 17,057 $ 692,514 $ 385 $ 709,956
Net realized gain (loss) from investment transactions - - - -
----------- ------------ -------- ------------
Net increase in net assets from operations 17,057 692,514 385 709,956
----------- ------------ -------- ------------
DISTRIBUTIONS TO SHAREHOLDERS (note 1) (17,057) (692,514) (385) (709,956)
----------- ------------ -------- ------------
COMMON SHARE TRANSACTIONS
(at constant net asset value of $1 per share) (note 1)
Net proceeds from sale of shares 1,126,675 16,626,815 - 17,753,490
Net asset value of shares issued to shareholders due to
reinvestment of distributions from net investment
income and from net realized gains from investment
transactions 15,591 626,707 - 642,298
----------- ------------ -------- ------------
1,142,266 17,253,522 - 18,395,788
Cost of shares redeemed (1,058,955) (15,341,900) - (16,400,855)
----------- ------------ -------- ------------
Net increase (decrease) in net assets derived from
Common share transactions 83,311 1,911,622 - 1,994,933
Net assets at the beginning of year 556,762 27,886,050 16,667 28,459,479
----------- ------------ -------- ------------
Net assets at the end of year $ 640,073 $ 29,797,672 $ 16,667 $ 30,454,412
=========== ============ ======== ============
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
34
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NUVEEN TAX-FREE MONEY MARKET FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
1. GENERAL INFORMATION AND SIGNIFICANT
ACCOUNTING POLICIES
At February 29, 1996, the money market Funds (the "Funds") covered in this
report are Nuveen Tax-Free Reserves, Inc., a nationally diversified Fund, Nuveen
California Tax-Free Fund, Inc. (comprising the Nuveen California Tax-Free Money
Market Fund) and Nuveen Tax-Free Money Market Fund, Inc. (comprising the Nuveen
Massachusetts and New York Tax-Free Money Market Funds).
The Funds are registered under the Investment Company Act of 1940 as an open-
end, diversified management investment companies.
Each Fund invests in tax-exempt money market instruments. Shares of the state
Funds are issued in three series: (1) the "Service Plan" series intended for
purchase by or through banks and other organizations who have agreed to perform
certain services for their customers who are shareholders of this series of the
Fund, (2) the "Distribution Plan" series intended for purchase by or through
securities dealers who have agreed to perform distribution and administrative
services for their customers who are shareholders of this series of the Fund and
(3) the "Institutional" series intended for purchase by trustees, bank trust
departments and investment bankers or advisers who do not perform additional
distribution and administrative services.
Each Fund issues its own shares, at net asset value which the Fund will seek to
maintain at $1.00 per share without a sales charge.
The following is a summary of significant accounting policies followed by the
Funds in the preparation of their financial statements in accordance with
generally accepted accounting principles.
Securities valuation
Investments in each of the Funds consist of short-term municipal securities
maturing within one year from the date of acquisition. Securities with a
maturity of more than one year in all cases have variable rate and demand
features qualifying them as short-term securities and are traded and valued at
amortized cost. On a dollar-weighted basis, the average maturity of all such
securities must be 90 days or less (at February 29, 1996, the dollar-weighted
average life was 33 days for Reserves, 22 days for California Money Market, 53
days for Massachusetts Money Market and 32 days for New York Money Market).
35
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Securities transactions
Securities transactions are recorded on a trade date basis. Realized gains and
losses from such transactions are determined on the specific identification
method. Securities purchased or sold on a when-issued or delayed delivery basis
may be settled a month or more after the transaction date. The securities so
purchased are subject to market fluctuation during this period. The Funds have
instructed the custodian to segregate assets in a separate account with a
current value at least equal to the amount of its purchase commitments. At
February 29, 1996, the Massachusetts Money Market had purchase commitments of
$2,561,026. There were no such purchase commitments in any of the other Funds.
Interest income
Interest income is determined on the basis of interest accrued, adjusted for
amortization of premiums and accretion of discounts.
Dividends and distributions to shareholders
Net investment income, adjusted for realized short-term gains and losses on
investment transactions, is declared as a dividend to shareholders of record as
of the close of each business day and payment is made or reinvestment is
credited to shareholder accounts after month-end.
Income taxes
Each Fund is a separate taxpayer for federal income tax purposes and intends to
comply with the requirements of the Internal Revenue Code applicable to
regulated investment companies by distributing all of its net investment income,
including any net realized gains from investments, to shareholders. Therefore,
no federal income tax provision is required. Furthermore, each Fund intends to
satisfy conditions which will enable interest from municipal securities, which
is exempt from regular federal income tax and designated state income taxes for
the California, Massachusetts and New York Money Market Funds, to retain such
tax exempt status when distributed to the shareholders of the Funds. All income
dividends paid during the year ended February 29, 1996, have been designated
Exempt Interest Dividends.
Insurance commitments
The Funds have obtained commitments (each a "Commitment") from Municipal Bond
Investors Assurance Corporation ("MBIA") with respect to certain designated
bonds held by the Funds for which credit support is furnished by banks
("Approved Banks") approved by MBIA under its established credit approval
standards. Under the terms of a Commitment, if a Fund were to determine that
certain adverse circumstances relating to the financial condition of the
Approved Bank had occurred, the Fund could cause MBIA to issue a "while-in-fund"
insurance policy covering the underlying bonds; after time and subject to
further terms and conditions, the Fund could obtain from MBIA an "insured-to-
maturity" insurance policy as to the covered bonds. Each type of insurance
policy would insure payment of interest on the bonds
36
<PAGE>
NUVEEN TAX-FREE MONEY MARKET FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
and payment of principal at maturity. Although such insurance would not
guarantee the market value of the bonds or the value of the Funds' shares, the
Funds believe that their ability to obtain insurance for such bonds under such
adverse circumstances will enable the Funds to hold or dispose of such bonds at
a price at or near their par value.
Derivative financial instruments
In October 1994, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 119 Disclosure about Derivative
Financial Instruments and Fair Value of Financial Instruments which prescribes
disclosure requirements for transactions in certain derivative financial
instruments including future, forward, swap, and option contracts, and other
financial instruments with similar characteristics. Although the Funds are
authorized to invest in such financial instruments, and may do so in the future,
they did not make any such investments during the year ended February 29, 1996,
other than occasional purchases of high quality synthetic money market
securities, if applicable.
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of increases and decreases in net
assets from operations during the reporting period.
2. SECURITIES TRANSACTIONS
Purchases and sales (including maturities) of investment securities during the
year ended February 29, 1996, were as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
RESERVES CA MA NY
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Purchases............. $1,299,772,860 $483,700,236 $235,091,836 $106,630,911
Sales and Maturities.. 1,317,652,500 458,401,000 216,602,000 104,915,000
- --------------------------------------------------------------------------------------
</TABLE>
At February 29, 1996, the cost of investments owned for federal income tax
purposes was the same as the cost for financial reporting purposes for all
Funds.
37
<PAGE>
NOTES TO FINANCIAL STATEMENTS
3. COMPOSITION OF NET ASSETS
At February 29, 1996, the Funds had common stock authorized at $.01 par value
per share. The composition of net assets as well as the number of authorized
shares were as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
RESERVES CA MA NY
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital paid in:
Service Plan series $ -- $ 70,721,933 $ 38,250,579 $ 554,459
Distribution Plan series -- 73,020,093 26,279,242 31,631,448
Institutional series -- 34,392,205 3,550,179 16,667
-------------- -------------- -------------- --------------
Net assets $ 339,662,464 $ 178,134,231 $ 68,080,000 $ 32,202,574
============== ============== ============== ==============
Authorized shares 2,000,000,000 2,350,000,000 2,500,000,000 2,500,000,000
============== ============== ============== ==============
</TABLE>
[CAPTION]
4. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the Funds' investment management agreements with Nuveen Advisory Corp.
(the "Adviser"), a wholly owned subsidiary of The John Nuveen Company, each Fund
pays to the Adviser an annual management fee, payable monthly, at the rates set
forth below which are based upon the average daily net asset value of each Fund:
<TABLE>
<CAPTION>
- -------------------------------------------------------------
MANAGEMENT FEES
- -------------------------------------------------------------
AVERAGE DAILY NET ASSET VALUE RESERVES CA, MA, NY
- -------------------------------------------------------------
<S> <C> <C>
For the first $500,000,000 .5 of 1% .4 of 1%
For the next $500,000,000 .475 of 1 .375 of 1
For net assets over $1,000,000,000 .45 of 1 .35 of 1
- -------------------------------------------------------------
</TABLE>
Also, pursuant to a distribution agreement with the Funds, Nuveen is the
distributor or principal underwriter of Fund shares and pays sales and promotion
expenses in connection with the offering of Fund shares. The Funds have adopted
a Distribution Plan pursuant to Rule 12b-1 of the Investment Company Act of 1940
and a Service Plan pursuant to which the Distributor Plan series and the Service
Plan series and Nuveen pay, in equal amounts, fees to securities dealers and
service organizations for services rendered in the distribution of shares of the
Funds or the servicing of shareholder accounts. For Reserves, total service
payments to such securities dealers and organizations on an annualized basis
range from .1 of 1% to .2 of 1% of the average daily net asset value of serviced
accounts up to $10 million and .3 of 1% for such assets over $10 million. For
the California, Massachusetts and New York Money Market Funds, total service
payments to such securities dealers and organizations are .25 of 1% per year of
the average daily net asset value of serviced accounts.
38
<PAGE>
NUVEEN TAX-FREE MONEY MARKET FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
The management fee referred to above is reduced by, or the Adviser assumes
certain expenses of each Fund, in an amount necessary to prevent the total
expenses of each Fund (including the management fee and each Fund's share of
service payments under the Distribution and Service Plans, but excluding
interest, taxes, fees incurred in acquiring and disposing of portfolio
securities and, to the extent permitted, extraordinary expenses) in any fiscal
year from exceeding .75 of 1% of the average daily net asset value of Reserves,
and .55 of 1% of the average daily net asset value of the California,
Massachusetts and New York Money Market Funds.
The management fee compensates the Adviser for overall investment advisory and
administrative services, and general office facilities. The Funds pay no
compensation directly to their directors who are affiliated with the Adviser or
to their officers, all of whom receive remuneration for their services to the
Funds from the Adviser.
5. INVESTMENT COMPOSITION
Each Fund invests in municipal securities which include general obligation and
revenue bonds. At February 29, 1996, the revenue sources by municipal purpose
for these investments, expressed as a percent of total investments, were as
follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------
RESERVES CA MA NY
- -----------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue Bonds:
Pollution Control Facilities 36% 12% 12% 27%
Health Care Facilities 23 20 21 15
Housing Facilities 6 22 3 8
Water/Sewer Facilities 3 14 6 --
Educational Facilities 4 -- 14 2
Lease Rental Facilities -- 12 -- --
Electric Utilities 2 4 10 --
Transportation 2 -- 5 3
Other 13 9 -- 22
General Obligation Bonds 11 7 29 23
--- --- --- ---
100% 100% 100% 100%
=== === === ===
- -----------------------------------------------------------
</TABLE>
In addition, certain temporary investments in short-term municipal securities
have credit enhancements (letters of credit, guarantees or insurance) issued by
third party domestic or foreign banks or other institutions (95% for Reserves,
100% for California, 62% for Massachusetts and 84% for New York).
For additional information regarding each investment security, refer to the
Portfolio of Investments.
39
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SELECTED DATA FOR A COMMON SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
- --------------------------------------------------------------------------------------------------------------------------------
Income from investment operations Less distributions
--------------------------------------------------------------------
Net
realized and Dividends
Net asset Net unrealized gain from net Distribution Net asset
value beginning investment (loss) from investment from value end of
of period income investments income capital gains period
- --------------------------------------------------------------------------------------------------------------------------------
RESERVES
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Year ended 2/29
1996 $1.000 $.032* $ - $(.032) $ - $1.000
Year ended 2/28,
1995 1.000 .025* - (.025) - 1.000
1994 1.000 .018* - (.018) - 1.000
1993 1.000 .023 - (.023) - 1.000
5 months ended
2/29/92 1.000 015 - (.015) - 1.000
Year ended 9/30,
1991 1.000 .046 - (.046) - 1.000
1990 1.000 .055 - (.055) - 1.000
1989 1.000 .057 - (.057) - 1.000
Year ended 2/29
1988 1.000 .045 - (.045) - 1.000
Year ended 2/28,
1987 1.000 .039 - (.039) - 1.000
1986 1.000 .045* - (.045) - 1.000
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes on page 46.
40
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
- ---------------------------------------------------------------------------------------------------------------
Ratios/Supplemental data
- ---------------------------------------------------------------------------------------------------------------
Ratio of Ratio of Ratio of Ratio of
expenses to net investment expenses net investment
Total return Net assets average income to average to average net income to average
on net asset end of period net assets before net assets before assets after net assets after
value (in thousands) reimbursement reimbursement reimbursement* reimbursement*
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
3.23% $339,662 .79% 3.18% .75% 3.22%
2.46 351,606 .78 2.40 .75 2.43
1.84 404,201 .80 1.78 .75 1.83
2.34 450,746 .74 2.35 .74 2.35
1.45 477,127 .75+ 3.48+ .75+ 3.48+
4.57 451,808 .72 4.56 .72 4.56
5.45 430,206 .73 5.45 .73 5.45
5.70 390,258 .72 5.69 .72 5.69
4.52 409,653 .73 4.52 .73 4.52
3.88 361,044 .73 3.85 .73 3.85
4.46 272,677 .80 4.34 .75 4.39
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
41
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SELECTED DATA FOR A COMMON SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
- ---------------------------------------------------------------------------------------------------------------------------
Income from investment operations Less distributions
- ---------------------------------------------------------------------------------------------------------------------------
Net
Net realized and
asset value Net unrealized Dividends from Distributions
beginning investment gain (loss) from net investment from
of period income investments income capital gains
- ---------------------------------------------------------------------------------------------------------------------------
CA**
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended
2/29/96
Service Plan series $1.000 $.033* $ - $(.033) $ -
Distribution Plan series 1.000 .033* - (.033) -
Institutional series 1.000 .034 - (.034) -
Year ended
2/28/95
Service Plan series 1.000 .026* - (.026) -
Distribution Plan series 1.000 .026* - (.026) -
Institutional series 1.000 .027 - (.027) -
Year ended
2/28/94
Service Plan series 1.000 .019 - (.019) -
Distribution Plan series 1.000 .019* - (.019) -
Institutional series 1.000 .021 - (.021) -
Year ended
2/28/93
Service Plan series 1.000 .023* - (.023) -
Distribution Plan series 1.000 .023* - (.023) -
Institutional series 1.000 .024 - (.024) -
8 months ended
2/29/92
Service Plan series 1.000 .024* - (.024) -
Distribution Plan series 1.000 .024* - (.024) -
Institutional series 1.000 .025 - (.025) -
Year ended
6/30/91
Service Plan series 1.000 .047* - (.047) -
Distribution Plan series 1.000 .047* - (.047) -
Institutional series 1.000 .048 - (.048) -
Year ended 6/30,
1990++ 1.000 .054* - (.054) -
1989++ 1.000 .056* - (.056) -
1988++ 1.000 .043* - (.043) -
1987++ 1.000 .039* - (.039) -
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes on page 46
42
<PAGE>
NUVEEN TAX-FREE MONEY MARKET FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental data
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of net
Ratio of investment Ratio Ratio of net
expenses to income to of expenses investment income
Net assets average net average net to average to average
Net asset value Total return on end of period assets before assets before net assets after net assets after
end of period net asset value (in thousands) reimbursement reimbursement reimbursement* reimbursement*
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 1.000 3.32% $ 70,722 .56% 3.28% .54% 3.30%
1.000 3.31 73,020 .62 3.23 .55 3.30
1.000 3.40 34,392 .46 3.39 .46 3.39
1.000 2.59 41,772 .59 2.15 .55 2.19
1.000 2.60 67,157 .64 2.47 .55 2.56
1.000 2.69 50,772 .47 2.74 .47 2.74
1.000 1.94 415,238 .53 1.94 .53 1.94
1.000 1.92 72,380 .73 1.74 .55 1.92
1.000 2.07 32,299 .41 2.06 .41 2.06
1.000 2.28 469,812 .57 2.24 .55 2.26
1.000 2.29 80,652 .62 2.19 .55 2.26
1.000 2.36 24,156 .47 2.33 .47 2.33
1.000 2.39 478,886 .56+ 3.53+ .55+ 3.54+
1.000 2.39 91,670 .61+ 3.48+ .55+ 3.54+
1.000 2.45 18,334 .45+ 3.64+ .45+ 3.64+
1.000 4.70 431,590 .57 4.65 .55 4.67
1.000 4.70 90,031 .61 4.61 .55 4.67
1.000 4.80 22,342 .45 4.77 .45 4.77
1.000 5.37 452,465 .59 5.34 .55 5.38
1.000 5.62 362,927 .57 5.68 .55 5.70
1.000 4.28 207,897 .59 4.27 .55 4.31
1.000 3.90 284,956 .63 3.79 .50 3.92
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
43
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SELECTED DATA FOR A COMMON SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
- ---------------------------------------------------------------------------------------------------------------
Income from investment operations Less distributions
--------------------------------------------------------------------
Net
Net realized and Dividends
asset value Net unrealized gain from net Distribution
beginning investment (loss) from investment from
of period income investments income capital gains
- ---------------------------------------------------------------------------------------------------------------
MA***
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended
2/29/96
Service Plan series $1.000 $.032* $-- $(.032) $--
Distribution Plan series 1.000 .032* -- (.032) --
Institutional series 1.000 .032* -- (.032) --
Year ended
2/28/95
Service Plan series 1.000 .025* -- (.025) --
Distribution Plan series 1.000 .025* -- (.025) --
Institutional series 1.000 .026 -- (.026) --
Year ended
2/28/94
Service Plan series 1.000 .018* -- (.018) --
Distribution Plan series 1.000 .017* -- (.017) --
Institutional series 1.000 .018 -- (.018) --
Year ended
2/28/94
Service Plan series 1.000 .023* -- (.023) --
Distribution Plan series 1.000 .023* -- (.023) --
Institutional series 1.000 .023* -- (.023) --
10 months ended
2/29/92
Service Plan series 1.000 .032* -- (.032) --
Distribution Plan series 1.000 .032* -- (.032) --
Institutional series 1.000 .032 -- (.032) --
Year ended
4/30/91
Service Plan series 1.000 .053* -- (.053) --
Distribution Plan series 1.000 .053* -- (.053) --
Institutional series 1.000 .053 -- (.053) --
Year ended 4/30,
1990++ 1.000 .057* -- (.057) --
1989++ 1.000 .050* -- (.050) --
1988++ 1.000 .043* -- (.043) --
12/10/86 to
4/30/87++ 1.000 .016* -- (.016) --
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
See notes on page 46.
44
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MONEY MARKET FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
- -------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental data
-------------------------------------------------------------------------------------------------------------------
Ratio of Ratio of Ratio of Ratio of
expenses to net investment expenses net investment
Net asset Total return Net assets average income to average to average net income to average
value end of on net asset end of period net assets before net assets before assets after net assets after
period value (in thousands) reimbursement reimbursement reimbursement* reimbursement*
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$1.000 3.17% $38,251 .63% 3.06% .55% 3.14%
1.000 3.17 26,279 .84 2.87 .55 3.16
1.000 3.18 3,550 .57 3.12 .54 3.15
1.000 2.53 27,732 .61 2.49 .55 2.55
1.000 2.53 24,237 .82 2.28 .55 2.55
1.000 2.61 1,036 .47 2.63 .47 2.63
1.000 1.77 38,576 .55 1.88 .52 1.91
1.000 1.74 27,773 .76 1.67 .55 1.88
1.000 1.80 3,406 .49 1.93 .49 1.93
1.000 2.33 40,214 .73 2.16 .55 2.34
1.000 2.33 27,993 .82 2.07 .55 2.34
1.000 2.34 5,325 .58 2.31 .55 2.34
1.000 3.22 61,476 .62+ 3.73+ .55+ 3.80+
1.000 3.22 34,509 .72+ 3.63+ .55+ 3.80+
1.000 3.24 8,917 .53+ 3.82+ .53+ 3.82+
1.000 5.30 37,979 .68 5.12 .55 5.25
1.000 5.30 33,809 .76 5.04 .55 5.25
1.000 5.30 14,973 .54 5.26 .54 5.26
1.000 5.70 53,631 .74 5.48 .55 5.67
1.000 5.00 31,319 .76 4.97 .55 5.18
1.000 4.29 35,614 .75 4.03 .48 4.30
1.000 1.60 12,371 3.02+ 1.40+ .06+ 4.36+
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
45
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A COMMON SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS
FOLLOWS:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations Less distributions
--------------------------------- ---------------------------------
Net
Net realized and
asset value Net unrealized Dividends from Distributions
beginning investment gain (loss) from net investment from
of period income investments income capital gains
- ----------------------------------------------------------------------------------------------------------------------------------
NY***
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended
2/29/96
Service Plan series $1.000 $.032* $ - $(.032) $ -
Distribution Plan series 1.000 .032* - (.032) -
Institutional series 1.000 .032* - (.032) -
Year ended
2/28/95
Service Plan series 1.000 .024* - (.024) -
Distribution Plan series 1.000 .024* - (.024) -
Institutional series 1.000 .023* - (.023) -
Year ended
2/28/94
Service Plan series 1.000 .015* - (.015) -
Distribution Plan series 1.000 .015* - (.015) -
Institutional series 1.000 .015* - (.015) -
Year ended
2/28/93
Service Plan series 1.000 .020* - (.020) -
Distribution Plan series 1.000 .020* - (.020) -
Institutional series 1.000 .020* - (.020) -
10 months ended
2/29/92
Service Plan series 1.000 .029* - (.029) -
Distribution Plan series 1.000 .029* - (.029) -
Institutional series 1.000 .030* - (.030) -
Year ended
4/30/91
Service Plan series 1.000 .047* - (.047) -
Distribution Plan series 1.000 .047* - (.047) -
Institutional series 1.000 .047* - (.047) -
Year ended 4/30,
1990++ 1.000 .054* - (.054) -
1989++ 1.000 .050* - (.050) -
1988++ 1.000 .041* - (.041) -
12/10/86 to
4/30/87++ 1.000 .015* - (.015) -
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Reflects the waiver of certain management fees and reimbursement of certain
other expenses by the Adviser, if applicable (note 4).
** Effective for the fiscal year ended June 30, 1991, and thereafter, the Fund
has presented the above per share data by series.
*** Effective for the fiscal year ended April 30, 1991, and thereafter, the
Fund has presented the above per share data by series.
+ Annualized.
+ + Represents combined per share data and ratios for the Service Plan,
Distribution Plan and Institutional series.
46
<PAGE>
NUVEEN TAX-FREE MONEY MARKET FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental data
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of Ratio of net Ratio of Ratio of net
expences investment income expences investment income
Net assets to average to average to average to average
Net asset value Total return on end of period net assets before net assets before net assets after net assets after
end of period net asset value (in thousands) reimbursement reimbursement reimbursement* reimbursement*
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
$1.000 3.20% $ 554 1.92% 1.82% .55% 3.19%
1.000 3.20 31,631 .94 2.80 .55 3.19
1.000 3.20 17 1.38 2.37 .55 3.20
1.000 2.36 640 .95 1.98 .55 2.38
1.000 2.37 29,798 .79 2.14 .55 2.38
1.000 2.28 17 2.14 .79 .55 2.38
1.000 1.51 557 1.49 .69 .55 1.63
1.000 1.51 27,886 .78 1.40 .55 1.63
1.000 1.51 17 4.60 (2.42) .55 1.63
1.000 2.02 529 1.17 1.42 .55 2.04
1.000 2.02 34,827 .78 1.81 .55 2.04
1.000 2.02 17 19.33 (16.59) .55 2.19
1.000 2.94 1,934 .87+ 3.19+ .55+ 3.51+
1.000 2.94 45,259 .71+ 3.35+ .55+ 3.51+
1.000 2.97 17 11.89+ (7.83)+ .55+ 3.51+
1.000 4.73 1,653 .88 4.39 .55 4.72
1.000 4.73 41,446 .69 4.58 .55 4.72
1.000 4.73 17 .62 4.65 .55 4.72
1.000 5.36 41,602 .71 5.18 .55 5.34
1.000 4.95 30,262 .86 4.74 .55 5.05
1.000 4.10 17,016 1.03 3.54 .50 4.07
1.000 1.50 4,134 4.20+ .05+ .05+ 4.20+
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
47
<PAGE>
[PHOTO OF PAINTING APPEARS HERE]
Your
investment
partners
Since 1898, John Nuveen & Co. Incorporated has worked to bring together the
various participants in the municipal bond industry and build strong
partnerships that benefit all concerned. Investors, financial advisers,
municipal officials, investment bankers-Nuveen believes that forging
relationships within these groups based on trust and value is the key to
successful investing.
As the oldest and largest municipal bond specialist in the United States,
Nuveen's investment bankers work with issuers to understand and meet their needs
in structuring and selling their bond issues.
Nuveen also works closely with financial advisers around the country,
including brokerage firms, banks, insurance companies, and independent financial
planners, to bring the benefits of tax-free investing to you. These advisers are
experts at identifying your needs and recommending the best solutions for your
situation. Together we make a powerful team, helping you create a successful
investment plan that meets your needs today and in the future.
For nearly 100 years,
Nuveen has earned its
reputation as a tax-free income
specialist by focusing on
municipal bonds
[NUVEEN LOGO]
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, Illinois 60606-1286
OEF3-APR96
<PAGE>
PART C--OTHER INFORMATION
NUVEEN TAX-FREE RESERVES, INC.
333 West Wacker Drive
Chicago, Illinois 60606
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBIT PAGE
------- ------- ------------
<C> <S> <C>
Renewal, dated May 7, 1996, of Investment Management
5(b). Agreement.
Renewal, dated July 27, 1995, of Distribution
6(b). Agreement.
8(b). Letter evidencing assignment of U.S. Trust Company of
New York's rights and responsibilities under the
Custody Agreement to The Chase Manhattan Bank, N.A.
10. Opinion of Fried, Frank, Harris, Shriver & Jacobson.
11. Consent of Independent Public Accountants.
16. Schedule of Computation of Yield Figures.
17. Financial Data Schedule.
99(b). Certified copy of resolution of Board of Directors
authorizing the signing of the names of directors and
officers on the Registration Statement pursuant to
power of attorney.
</TABLE>
<PAGE>
EXHIBIT 5(b)
NUVEEN TAX-FREE RESERVES, INC.
RENEWAL OF INVESTMENT MANAGEMENT AGREEMENT
------------------------------------------
This Agreement made this 7th day of May, 1996 by and between Nuveen Tax-Free
Reserves, Inc., a Maryland corporation (the "Fund"), and Nuveen Advisory Corp.,
a Delaware corporation (the "Adviser");
WHEREAS, the parties hereto are the contracting parties under that certain
Investment Management Agreement (the "Agreement") pursuant to which the Adviser
furnishes investment management and other services to the Fund; and
WHEREAS, the Agreement terminates August 1, 1996 unless continued in the manner
required by the Investment Company Act of 1940; and
WHEREAS, the Board of Directors, at a meeting called for the purpose of
reviewing the Agreement, have approved the Agreement and its continuance until
August 1, 1997 in the manner required by the Investment Company Act of 1940.
NOW THEREFORE, in consideration of the mutual covenants contained in the
Agreement the parties hereto do hereby continue the Agreement in effect until
August 1, 1997 and ratify and confirm the Agreement in all respects.
NUVEEN TAX-FREE RESERVES, INC.
By: /s/ James J. Wesolowski
--------------------------
Vice President
ATTEST:
/s/ Karen L. Healy
---------------------------
Assistant Secretary
NUVEEN ADVISORY CORP.
By: /s/ Gifford R. Zimmerman
--------------------------
Vice President
ATTEST:
/s/ Larry Martin
---------------------------
Assistant Secretary
<PAGE>
Exhibit 6(b)
Renewal of Distribution Agreement
---------------------------------
This Agreement made this 27th day of July, 1995 by and between Nuveen Tax-Free
Reserves, Inc., a Maryland corporation (the "Fund"), and John Nuveen & Co.
Incorporated, a Delaware corporation (the "Underwriter");
WHEREAS, the parties hereto are the contracting parties under that certain
Distribution Agreement (the "Agreement") pursuant to which the Underwriter acts
as agent for the distribution of shares of the Fund; and
WHEREAS, the Agreement terminates August 1, 1995 unless continued in the manner
required by the Investment Company Act of 1940; and
WHEREAS, the Board of Directors of the Fund, at a meeting called for the purpose
of reviewing the Agreement has approved the Agreement and its continuance until
August 1, 1996 in the manner required by the Investment Company Act of 1940;
NOW THEREFORE, in consideration of the mutual convenants contained in the
Agreement the parties hereto do hereby continue the Agreement in effect until
August 1, 1996 and ratify and confirm this Agreement in all respects.
NUVEEN TAX-FREE RESERVES, INC.
By: /s/ Larry Martin
--------------------------
Vice President
ATTEST:
/s/ Morrison C. Warren
---------------------------
Assistant Secretary
JOHN NUVEEN & CO. INCORPORATED
By: /s/ Kenneth C. Dunn
--------------------------
Vice President
ATTEST:
/s/ Gifford R. Zimmerman
---------------------------
Assistant Secretary
<PAGE>
EXHIBIT 8(b)
The Chase Manhattan Bank, N.A.
770 Broadway
New York, New York 10003-9598
April 18, 1996
Mr. Giff Zimmerman
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606
Dear Giff:
On September 2, 1995, The United States Trust Company of New York (UST) was
merged into Chase Manhattan Bank, N.A. (Chase). As a result of this transac-
tion, Chase succeeded by operation of law, all rights and responsibilities of
UST under all Transfer Agency, Custodian and Fund Accounting agreements be-
tween US Trust and John Nuveen & Co.'s managed investment companies.
Sincerely,
/s/ Andrew M. Massa
_______________________________________
Andrew M. Massa
Vice President
<PAGE>
Exhibit 10
June 26, 1996
(202) 639-7065
Nuveen Tax-Free Reserves, Inc.
333 West Wacker Drive
Chicago, Illinois 60606
RE: REGISTRATION STATEMENT ON FORM N-1A
UNDER THE SECURITIES ACT OF 1933
(FILE NO. 2-78736)
-----------------------------------
Ladies and Gentlemen:
We have acted as counsel to Nuveen Tax-Free Reserves, Inc., a Maryland
corporation (the "Fund"), in connection with the above-referenced Registration
Statement on Form N-1A (as amended, the "Registration Statement") which relates
to the Fund's shares of common stock, par value $.01 (the "Shares"). This
opinion is being delivered to you in connection with the Fund's filing of
Post-Effective Amendment No. 15 to the Registration Statement (the "Amendment")
with the Securities and Exchange Commission pursuant to Rule 485(b) of the
Securities Act of 1933 (the "1933 Act"). With your permission, all assumptions
and statements of reliance herein have been made without any independent
investigation or verification on our part except to the extent otherwise
expressly stated, and we express no opinion with respect to the subject matter
or accuracy of such assumptions or items relied upon.
In connection with this opinion, we have reviewed, among other things,
executed copies of the following documents:
(a) a certificate of the Maryland State Department of Assessments and
Taxation (the "Department") as to the existence and good standing of
the Fund;
(b) copies, certified by the Department, of the Fund's Articles of
Incorporation and of all amendments and all supplements thereto (the
"Articles of Incorporation");
(c) a certificate executed by Karen L. Healy, an Assistant Secretary of
the Fund, certifying as to the Fund's Articles of Incorporation and
By-Laws, as amended (the "By-Laws"), and certain resolutions adopted
by the Board of Directors of the Fund authorizing the issuance of the
Shares; and
<PAGE>
Nuveen Tax-Free Reserves, Inc.
June 26, 1996
Page 2
(d) a printer's proof, dated June 26, 1996, of the Amendment.
In our capacity as counsel to the Fund, we have examined the originals, or
certified, conformed or reproduced copies, of all records, agreements,
instruments and documents as we have deemed relevant or necessary as the basis
for the opinion hereinafter expressed. In all such examinations, we have
assumed the legal capacity of all natural persons executing documents, the
genuineness of all signatures, the authenticity of all original or certified
copies, and the conformity to original or certified copies of all copies
submitted to us as conformed or reproduced copies. As to various questions of
fact relevant to such opinion, we have relied upon, and assume the accuracy of,
certificates and oral or written statements of public officials and officers or
representatives of the Fund. We have assumed that the Amendment, as filed with
the Securities and Exchange Commission, will be in substantially the form of the
printer's proof referred to in paragraph (d) above.
Based upon, and subject to, the limitations set forth herein, we are of the
opinion that the Shares, when issued and sold in accordance with the Fund's
Articles of Incorporation and for the consideration described in the
Registration Statement, will be legally issued, fully paid and nonassessable.
The opinion expressed herein is limited to the laws of the State of
Maryland.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving this consent, we do not admit that we are in
the category of persons whose consent is required under Section 7 of the 1933
Act.
Very truly yours,
FRIED, FRANK, HARRIS, SHRIVER & JACOBSON
By: /s/ Thomas S. Harman
-------------------------------------
Thomas S. Harman
<PAGE>
[LETTERHEAD OF ARTHUR ANDERSEN LLP]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated April 8, 1996, and to all references to our firm included in or made a
part of this registration statement of Nuveen Tax-Free Reserves, Inc.
/S/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Chicago, Illinois
June 13, 1996
<PAGE>
EXHIBIT 16
SCHEDULE OF COMPUTATION OF YIELD FIGURES
I. CURRENT YIELD a. Current Yield is calculated as follows:
i. Net investment income per share
for the seven-day period
------------------------------- = Base Period Return
Value of account at beginning
of seven-day period
ii. Base Period Return X 365/7 = Current Yield
b. Calculation of Current Yield for seven-day period
ended February 29, 1996:
( .0005282 ) 365
( -------- ) X --- = 2.75%
( 1.00 ) 7 =====
II. EFFECTIVE a. Effective Yield is calculated as follows:
YIELD
(Base Period Return + 1) 365/7 - 1 = Effective Yield
b. Calculation of Effective Yield for seven-day period
ended February 29, 1996:
[ ( .0005282 ) ] 365/7
[ ( -------- ) + 1 ] - 1 = 2.79%
[ ( 1.00 ) ] =====
III. TAXABLE
EQUIVALENT a. The Taxable Equivalent Yield formula is as follows:
YIELD
Tax Exempt Yield
-----------------------
(1 - federal income
tax rate)
b. Based on a maximum Federal income tax rate of 39.6%,
the Taxable Equivalent Yield for the seven-day period
ended February 29, 1996 is as follows:
2.75%
-------- = 4.55%
1 - .396 =====
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by refences
to such documents.
</LEGEND>
<SERIES>
<NUMBER> 01
<NAME> RESERVES
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> FEB-29-1996
<PERIOD-START> MAR-01-1995
<PERIOD-END> FEB-29-1996
<INVESTMENTS-AT-COST> 335520
<INVESTMENTS-AT-VALUE> 335520
<RECEIVABLES> 1305
<ASSETS-OTHER> 3887
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 340712
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1049
<TOTAL-LIABILITIES> 1049
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 339662
<SHARES-COMMON-STOCK> 339662
<SHARES-COMMON-PRIOR> 351606
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 339662
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 13394
<OTHER-INCOME> 0
<EXPENSES-NET> 2529
<NET-INVESTMENT-INCOME> 10865
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 10865
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 10865
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 808776
<NUMBER-OF-SHARES-REDEEMED> 830960
<SHARES-REINVESTED> 10240
<NET-CHANGE-IN-ASSETS> (11944)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1686
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2648
<AVERAGE-NET-ASSETS> 337142
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> .032
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .032
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> .75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
Exhibit 99(b)
Certified Resolution
--------------------
The undersigned, James J. Wesolowski, hereby certifies, on behalf of Nuveen
Tax-Free Reserves Inc. (the "Fund"), (1) that he is the duly elected,
qualified and acting Secretary of the Fund, and that as such Secretary he has
custody of its corporate books and records, (2) that attached to this
Certificate is a true and correct copy of a resolution duly adopted by the Board
of Directors of the Fund at a meeting held on January 21, 1996, and (3) that
said resolution has not been amended or rescinded and remains in full force and
effect.
/s/ James J. Wesolowski
June 10, 1996 ------------------------------
James J. Wesolowski, Secretary
<PAGE>
Exhibit 99(b)
FURTHER RESOLVED, that each member of the Board and officer of the Fund who may
be required to execute the Registration Statement on Form N-1A, or any amendment
or amendments thereto, be, and each of them hereby is, authorized to execute a
power of attorney appointing Richard J. Franke, Timothy R. Schwertfeger, James
J. Wesolowski, Larry W. Martin, Gifford R. Zimmerman, and Thomas S. Harman, and
each of them, his true and lawful attorneys-in-fact and agents, with full power
of substitution and resubsitution, for him and in his name, place and stead, in
any and all capacities, to sign the Registration Statement and any and all
amendments thereto and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and peform each and every act and thing requisite or
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, and ratifying and confirming all
that said attorneys-in-fact and agents or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue
thereof.
