<PAGE>
As filed with the Securities and Exchange Commission on June 16, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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. 17
--- [X]
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [_]
File No. 811-3531
Amendment No. 18
--- [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
Gifford R. Zimmerman, Esq.--Vice President and Assistant 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 [_] on (date) pursuant to paragraph
pursuant to paragraph (b) (a)(1)
[X] on June 24, 1998 pursuant [_] 75 days after filing pursuant
to paragraph (b) to paragraph (a)(2)
[_] 60 days after filing [_] on (date) pursuant to paragraph
pursuant to paragraph (a)(1) (a)(2) of Rule 485.
If appropriate, check the following box:
[_] This post-effective amendment designates a new effective date for a previ-
ously filed post-effective amendment.
If appropriate, check the following box:
[_] This post-effective amendment designates a new effective date for a previ-
ously filed post-effective amendment.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
NUVEEN TAX-FREE RESERVES, INC.
CONTENTS
OF
POST-EFFECTIVE AMENDMENT NO. 17
TO
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
FILE NO. 2-78736
AND
AMENDMENT NO. 18
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]
Money Market
Funds
June 24, 1998
Prospectus
Dependable, tax-free income
to help you keep more of
what you earn.
[PHOTO APPEARS HERE]
Reserves
<PAGE>
Nuveen Tax-Free Reserves, Inc.
JUNE 24, 1998
PROSPECTUS
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 securi-
ties 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 Informa-
tion" dated June 24, 1998, containing further infor-
mation 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. Incor-
porated by calling (800) 858-4084.
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 DISAP-
PROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION NOR HAS THE SECURI-
TIES 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) 858-4084
---
1
<PAGE>
Contents
<TABLE>
<C> <S>
2 Summary of Fund Expenses
3 Highlights
4 Financial Highlights
4 Yield
5 The Fund and its Investment
Objective and Policies
7 Management of the Fund
7 Dividends and Taxes
8 Net Asset Value
9 How to Buy Fund Shares
11 How to Redeem Fund Shares
13 General Information
14 Taxable Equivalent Yield Tables
</TABLE>
Summary of Fund Expenses
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 Feb-
ruary 28, 1998.
<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 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 below,
the Fund charges no redemption fees of any kind.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 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.
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 Fund expenses
in an amount necessary 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 28, 1998, other operating
expenses would have been .27 of 1% of the average daily net assets, and total
expenses would have been .81 of 1% of the average daily net assets. See "Man-
agement of the Fund."
---
2
<PAGE>
Highlights
Nuveen Tax-Free Reserves, Inc. (the "Fund") is an open-end, diversified manage-
ment investment company with the objective of providing, through investment in
a professionally managed portfolio of high quality short-term Municipal Obliga-
tions, 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 will value its portfolio
at amortized cost and seek to maintain a net asset value of $1.00 per share.
There is no guarantee that this value will be maintained. See "Net Asset Value"
on page 8 and "The Fund and Its Investment Objective and Policies" on page 5.
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 inter-
est 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 "Divi-
dends and Taxes" on page 7.
HOW TO BUY FUND SHARES
Fund shares may be purchased on days on which the Federal Reserve Bank of Bos-
ton 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 9. For further information about the Fund or for assis-
tance in opening an account, please call Nuveen toll-free at (800) 858-4084.
HOW TO REDEEM FUND SHARES
Shareholders may redeem shares at the 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 11.
DIVIDENDS AND REINVESTMENT
The Fund will declare dividends daily from its accumulated net income and dis-
tribute the dividends monthly in the form of additional shares or, at the
option of the investor, in cash. See "Dividends and Taxes" on page 7.
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 11. 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. See "Management of the Fund" on page
7.
INVESTMENTS
The Fund invests primarily in municipal money market instruments. The Fund may
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" beginning on page 5.
The information set forth above should be read in conjunction with the detailed
information set forth elsewhere in this Prospectus.
---
3
<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>
OPERATING PERFORMANCE LESS DISTRIBUTIONS
----------------------- ------------------------
NET
REALIZED AND DIVIDENDS NET TOTAL
NET ASSET UNREALIZED FROM TAX- ASSET RETURN
VALUE NET GAIN (LOSS) EXEMPT NET DISTRIBUTIONS VALUE ON NET
YEAR ENDED BEGINNING INVESTMENT FROM INVESTMENT FROM CAPITAL END OF ASSET
FEBRUARY 28/29, OF PERIOD INCOME(A) INVESTMENTS INCOME GAINS PERIOD VALUE(B)
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1998 $1.00 $.03 $ - $(.03) $ - $1.00 3.02%
1997 1.00 .03 - (.03) - 1.00 2.87
1996 1.00 .03 - (.03) - 1.00 3.23
1995 1.00 .03 - (.03) - 1.00 2.46
1994 1.00 .02 - (.02) - 1.00 1.84
1993 1.00 .02 - (.02) - 1.00 2.34
1992 (c) 1.00 .02 - (.02) - 1.00 1.45
1991 (D) 1.00 .05 - (.05) - 1.00 4.57
1990 (d) 1.00 .06 - (.06) - 1.00 5.45
1989 (d) 1.00 .06 - (.06) - 1.00 5.70
- -------------------------------------------------------------------------------------------
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
------------------------------------------------------------------------
RATIO OF NET RATIO OF NET
RATIO OF INVESTMENT RATIO OF INVESTMENT
NET ASSETS EXPENSES TO INCOME TO EXPENSES TO INCOME TO
END OF AVERAGE NET AVERAGE NET AVERAGE NET AVERAGE NET
YEAR ENDED PERIOD (IN ASSETS BEFORE ASSETS BEFORE ASSETS AFTER ASSETS AFTER
FEBRUARY 28/29, THOUSANDS) REIMBURSEMENT REIMBURSEMENT REIMBURSEMENT(A) REIMBURSEMENT(A)
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1998 $270,723 .81% 2.96% .75% 3.02%
1997 304,087 .80 2.82 .75 2.87
1996 339,662 .79 3.18 .75 3.22
1995 351,606 .78 2.40 .75 2.43
1994 404,201 .80 1.78 .75 1.83
1993 450,746 .74 2.35 .74 2.35
1992 (c) 477,127 .75* 3.48* .75* 3.48*
1991 (D) 451,808 .72 4.56 .72 4.56
1990 (d) 430,206 .73 5.45 .73 5.45
1989 (d) 390,258 .72 5.69 .72 5.69
- -------------------------------------------------------------------------------------------
</TABLE>
* Annualized
(a) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory.
(b) Total returns are calculated on net asset value and are not annualized.
(c) For the five months ended February 29.
(d) For the fiscal year ended September 30.
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. "Tax-
able 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 28, 1998, the yield, effective
yield and taxable equivalent yield (using the maximum federal income tax rate
of 39.6%) for the Fund were 2.86%, 2.90% and 4.74%, respectively.
This Prospectus may be in use for a full year and it can be expected that dur-
ing this period there will be material fluctuations in yield from that quoted
above. For information as to current yields, please call Nuveen at (800) 858-
4084.
---
4
<PAGE>
The Fund and Its Investment 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 funda-
mental 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 assur-
ance 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 Commis-
sion ("SEC"), and are: (1) highly rated by nationally recognized statistical
rating organizations; (2) unrated, but which, in the opinion of Nuveen Adviso-
ry, 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 pur-
chasing 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 Com-
pany 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 pay-
ment at par on such an instrument could be adversely affected by events occur-
ring between the date the Fund elects to tender the instrument and the date
proceeds are due.
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 commer-
cial banks as evidence of borrowings. Since these short-term securities fre-
quently 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.
To help protect against such losses, the Fund has obtained from MBIA Insurance
Corp. a commitment to issue, subject to certain conditions and at the Fund's
request, insurance policies to cover certain Municipal Obligations held by the
Fund that are backed by a credit agreement from one of a number of banks previ-
ously approved by MBIA. If the bank were to deteriorate financially (under
standards set forth in MBIA's commitment), the Fund could elect to purchase
insurance on the underlying Municipal Obligation from MBIA, which would insure
payment of regularly scheduled principal of and interest on the Municipal Obli-
gation. Although this insurance would not guarantee the market value of the
Municipal Obligations or the value of Fund shares, the Fund believes that its
ability to obtain such insurance will enable the Fund to hold or sell these
securities at a price at or near their par value.
The Fund may purchase but to date has not purchased and has no present inten-
tion 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 acquisi-
tion of securities.
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 28, 1998 the average matu-
rity of the Fund's portfolio ranged from 23 to 48 days.
---
5
<PAGE>
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 gener-
ally 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 Obliga-
tions, 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 reve-
nues.
Municipal Obligations also include very short-term unsecured, negotiable prom-
issory notes, issued by states, municipalities, and their agencies, which are
known as "tax-exempt commercial paper" or "municipal paper." Payment of princi-
pal and interest on issues of municipal paper may be made from various sources,
to the extent that funds are available therefrom. There is a limited secondary
market for issues of municipal paper.
While these various types of notes as a group represent the major portion of
the tax-exempt note market, other types of notes are occasionally available in
the marketplace and the Fund may invest in such other types of notes to the
extent consistent with its investment objective and limitations. Such notes may
be issued for different purposes and with different security than those men-
tioned above.
The yields on Municipal Obligations are dependent on a variety of factors,
including the condition of the general money market and the Municipal Obliga-
tion 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 reg-
ular settlement date. (When-issued transactions normally settle within 15 to 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 pur-
chase securities on a when-issued or delayed delivery basis may involve an ele-
ment 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. 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, without the approval of the holders
of a majority of the outstanding shares of the Fund: (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) 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; (3) 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 (4) 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 Obli-
gations
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6
<PAGE>
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 (2), the "issuer" of a
security shall be deemed to be the entity whose assets and revenues are commit-
ted 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).
For a more complete description of the fundamental and non-fundamental invest-
ment 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.
Management of the Fund
The management of the Fund, including general supervision of the duties per-
formed 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 cleri-
cal, 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 as follows:
<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSET
VALUE MANAGEMENT FEES
- -------------------------------------------
<S> <C>
For the first $500 million .500 of 1%
For the next $500 million .475 of 1%
For assets over $1 billion .450 of 1%
- -------------------------------------------
</TABLE>
All fees and expenses are accrued daily and deducted before payment of divi-
dends 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 Distribu-
tion and Service Plan, but excluding interest, taxes, fees incurred in acquir-
ing 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 28, 1998, 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 28, 1998 would have been .81 of 1% of the Fund's average daily
net assets.
Nuveen Advisory currently serves as investment adviser to 42 open-end funds
(the "Nuveen Mutual Funds") and 52 exchange-traded municipal bond funds (the
"Nuveen Exchange-Traded Funds"). As of the date of this Prospectus, Nuveen
Advisory manages approximately $36 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. Nuveen, the princi-
pal underwriter of the Fund's shares, is the sponsor of the Nuveen Tax-Exempt
Unit Trust and Nuveen Unit Trusts, registered unit investment trusts. It is
also the principal underwriter of 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 funds and unit trusts.
Founded in 1898, Nuveen is a subsidiary of The John Nuveen Company which, in
turn, is approximately 78% owned by The St. Paul Companies, Inc. ("St. Paul").
St. Paul is located in St. Paul, Minnesota, and is principally engaged in pro-
viding property-liability insurance through subsidiaries.
Dividends and Taxes
DIVIDENDS
All of the net income of the Fund is declared on each calendar day as a divi-
dend 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. Divi-
dends 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
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7
<PAGE>
receive capital gains in cash. The Fund does not anticipate realizing any sig-
nificant 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 regu-
lated 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 share-
holders 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 corpora-
tions. 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 taxable income for that year, and distri-
butions to shareholders would be taxable to shareholders as ordinary dividend
income for federal income tax purposes to the extent of the Fund's available
earnings and profits.
The Code provides that interest on indebtedness incurred or continued to pur-
chase or carry tax-free investments, such as shares of the Fund, is not deduct-
ible. 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 substan-
tial users. Accordingly, the Fund may not be an appropriate investment for
shareholders who are considered either a "substantial user" or a "related per-
son" 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 spe-
cific 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 lia-
bility 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 corpo-
rations 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.
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. These provisions are subject to
change by legislative or administrative action, and any such change may be ret-
roactive 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 MATTERS
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 share-
holders of the Fund are advised to consult their own tax advisers in that
regard.
Net Asset Value
Net asset value of the Fund's shares will be determined by The Chase Manhattan
Bank, 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.
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8
<PAGE>
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 con-
nection, the Fund values its portfolio securities on the basis of their amor-
tized 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.
How to Buy Fund Shares
IN GENERAL
Fund shares may be purchased on business days (as defined under "Net Asset Val-
ue") 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 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 TELEPHONE
To open an account, call Nuveen toll-free at (800) 858-4084 to 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 Mis-
souri Bank of Kansas City, N.A. as follows:
(on or before August 10, 1998)
United Missouri Bank of Kansas City, N.A.
ABA #101000695
Nuveen Tax-Free Reserves, Inc.
Shareholder Account No. (see above):
Shareholder Account Name:
(after August 10, 1998)
Chase Manhattan Bank
ABA #021000021 DDA #323-096328
For: The Nuveen Funds
For [Nuveen Fund Name]
Please include your name and account number.
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 the bank 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 fol-
lowing business day.
PURCHASE BY MAIL
To open an account, complete an application form and mail it with a check or
Federal Reserve draft to Nuveen Tax-Free Reserves, Inc., P.O. Box 5330, Denver,
Colorado 80217-5330 (if mailed before August 10, 1998) and to Nuveen Tax-Free
Reserves, Inc., P.O. Box 5186, Bowling Green Station, New York, New York 10274-
5186 (if mailed after August 10, 1998). 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 - ELECTRONIC FUNDS TRANSFER
You can use Fund Direct to link your Fund account to your account at your bank
or other financial institution which will enable you to send money electroni-
cally between those accounts to perform a variety of account transactions.
These include purchases of shares by telephone, investments under a Systematic
Investment Plan, and sending dividends and distributions, redemption payments
or Systematic Withdrawal Plan payments directly to your bank account. To acti-
vate Fund Direct privileges, just complete the appropriate section of the
enclosed Account Application, or an Account Update Form. To obtain an Account
Update Form, call Nuveen at (800) 858-4084. 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 you indicate otherwise
in writing. After you establish Fund Direct privileges for your account, any
change of bank account information must be made by signature-guaranteed
instructions to our Transfer Agent as described in "How to Redeem Fund Shares."
Purchases may be made by telephone only after your account has been estab-
lished. To purchase shares in amounts up to $250,000 through a telephone repre-
sentative, call our Transfer Agent at (800) 858-4084. The purchase payment will
be debited from your bank account.
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9
<PAGE>
PURCHASE THROUGH A SECURITIES DEALER OR SERVICE ORGANIZATION
To open an account through a bank or a securities broker or dealer ("service
organization"), investors should send money to that organization for transmis-
sion to the Fund and furnish it with the information required in the Applica-
tion Form. The Fund has a distribution plan pursuant to which payments are made
to service organizations which provide assistance in distributing shares or
provide services to shareholders of the Fund. See "Distribution and Service
Plan."
PURCHASE BY REINVESTMENT OF NUVEEN UNIT TRUST DISTRIBUTIONS
Unitholders of Nuveen Unit Trusts may purchase shares of the Fund by automati-
cally reinvesting distributions from their Nuveen Unit Trust. To obtain infor-
mation on share purchases through investment of Nuveen Unit Trust
distributions, check the applicable box on the enclosed 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
SYSTEMATIC INVESTMENT PLAN
Once you have established a Fund account, you may make regular investments in
your Fund in an amount of $50 or more each month by authorizing our Transfer
Agent 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 Account Update Form which you can use to ini-
tiate a Systematic Investment Plan, call Nuveen toll-free at (800) 858-4084.
PAYROLL DIRECT DEPOSIT PLAN
Once you have established a Fund account, you may, with your employer's con-
sent, make regular investments in Fund shares of $50 or more per month by
authorizing your employer to deduct this amount automatically from your pay-
check. 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) 858-4084.
OTHER SHAREHOLDER PROGRAMS
EXCHANGE PRIVILEGES
You may exchange shares of the Fund for the appropriate class of shares of any
other open-end management investment company with reciprocal exchange privi-
leges advised by Nuveen Advisory (the "Nuveen Funds"), into an identically reg-
istered account, provided that the Nuveen Fund into which shares are to be
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. You may exchange Fund shares by calling (800) 858-4084 or by
mailing your written request to our Transfer Agent. Shares of Nuveen Funds pur-
chased subject to a front-end sales charge may be exchanged for shares of the
Fund or any other Nuveen Fund at the next determined net asset value without
any front-end sales charge. No CDSC otherwise applicable will be assessed on an
exchange, and the holding period of your investment will be carried over to the
new fund for purposes of determining any future CDSC. You may not exchange B
shares for shares of a Nuveen money market fund. Shares of any Nuveen Fund pur-
chased through dividend reinvestment or through reinvestment of Nuveen Unit
Trust distributions (and any dividends thereon) may be exchanged for Class A
shares of any Nuveen Fund without a front-end sales charge. Exchanges of shares
with 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. The exchange privilege may be
modified or discontinued at any time. If you do not wish to have telephone
exchange privileges, you must indicate this in the "Telephone Services" section
of your Account Application or otherwise notify the Fund in writing of your
desire.
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10
<PAGE>
ADDITIONAL INFORMATION
If you choose to invest in the Fund, an account will be opened and maintained
for you by our Transfer Agent. Share certificates will be issued to you only
upon written request to our Transfer Agent, 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 registra-
tion 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.
The Fund has authorized one or more brokers to accept on its behalf purchase
and redemption orders. Such brokers are authorized to designate other interme-
diaries to accept purchase and redemption orders on the Fund's behalf. The Fund
will be deemed to have received a purchase or redemption order when an autho-
rized broker or, if applicable, a broker's authorized designee accepts the
order. Customer orders received by such broker (or their designee) will be
priced at the Fund's net asset value next computed after they are accepted by
an authorized broker (or their designee). Orders accepted by an authorized bro-
ker (or their designee) before the close of regular trading on the New York
Stock Exchange will receive that day's share price; orders accepted after the
close of trading will receive the next business day's share price.
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.
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; process-
ing 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 organiza-
tions who render such services. Service payments will be made to such organiza-
tions 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, half of which will be paid by the Fund. Nuveen may, in its discre-
tion, pay additional amounts from its own resources to a service organization
satisfying certain criteria.
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 materi-
ally 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.
How to Redeem
Fund Shares
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 deter-
mine 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 pro-
ceeds 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.
CHECK REDEMPTION
Shareholders may request that the Fund provide them with drafts ("Redemption
Checks") drawn on the Fund's account. 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.
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11
<PAGE>
When a Redemption Check is presented, a sufficient number of full and frac-
tional 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 REQUEST
You may redeem shares by sending a written request for redemption directly to
the Fund, c/o Shareholder Services, Inc., P.O. Box 5330, Denver, Colorado
80217-5330 (if mailed before August 10, 1998) and to the Fund, c/o Nuveen
Investor Services, P.O. Box 5186, Bowling Green, New York, New York 10274-5186
(if mailed after August 10, 1998), 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 preceding 30 days), the signa-
ture 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 circum-
stances 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.
TELEPHONE REDEMPTION BY CHECK
Unless you have declined telephone privileges, you may sell fund shares by
calling (800) 858-4084. Your telephone redemption must not exceed $50,000 and
you may not redeem by telephone shares held in certificate form. 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 effected and the redemption check will be
mailed on the second business day.
Nuveen, the transfer agent, or the Fund will be liable for losses resulting
from unauthorized telephone redemptions only if they do not follow reasonable
procedures designed to verify the identity of the caller. You should immedi-
ately verify your trade confirmations when you receive them. Telephone redemp-
tions will not be honored for 30 days after the address on your account has
changed.
TELEPHONE REDEMPTION VIA FUND DIRECT
To redeem shares held in non-certificate form by telephone with the redemption
proceeds paid via Fund Direct-Electronic Funds Transfer, you must complete the
Telephone Services section of the enclosed Application Form and return it to
Nuveen or our Transfer Agent. If you did not authorize Telephone Redemption via
Fund Direct when you opened your account, you may do so by sending a written
request to the Fund signed by each account owner with signatures guaranteed by
a member of an approved Medallion Guarantee Program or in such other manner as
may be acceptable to the Fund. Proceeds of share redemptions made by Fund
Direct will be transferred only to the commercial bank account specified by the
shareholder. Redemption proceeds may be delayed one additional business day if
the Federal Reserve Bank of Boston or the Federal Reserve Bank of New York is
closed on the day the redemption proceeds would ordinarily be wired.
If you have authorized Telephone Redemption via Fund Direct, you can take
advantage of two methods of telephone redemption: regular telephone redemption
and expedited telephone redemption. You may make regular Fund Direct redemption
requests by calling Nuveen at (800) 858-4084. If a regular telephone redemption
request is received prior to 4:00 p.m. Eastern Time, the shares to be redeemed
earn income on the day the request is made, and the redemption is effected on
the following business day. For regular redemption requests received after 4:00
p.m. Eastern Time, the shares to be redeemed earn income through the following
business day, and the redemption is effected on the second business day follow-
ing the request. For all regular redemptions, you will typically receive your
funds within three business days after your redemption is effected. You may
make expedited telephone redemption requests to redeem shares that are worth at
least $1,000 by calling Nuveen at (800) 858-4084. If an expedited redemption
request is received by 12:00 noon Eastern Time, the shares to be redeemed do
not earn income on that day, but the redemption is effected, and you will nor-
mally receive your funds, on that day. If an expedited redemption request is
received after 12:00 noon Eastern Time, the shares to be redeemed earn income
on the day the request is received. The redemption is effected, and you will
normally receive your funds, on the next business day following the request.
The Fund reserves the right to charge a fee for expedited redemption requests.
HOW TO CHANGE AUTHORIZED REDEMPTION INSTRUCTIONS
In order to establish multiple accounts, or to change the account or accounts
designated to receive redemption proceeds, a written request specifying the
change must be sent to Nuveen. This request must be signed by each
---
12
<PAGE>
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 modified or terminated at any time, on 30 days' notice, by the
Fund. The Fund, the transfer agent and Nuveen will not be liable for following
telephone instructions reasonably believed to be genuine.
REDEMPTION THROUGH SERVICE ORGANIZATIONS
Fund shareholders may also redeem shares through their accounts with service
organizations in accordance with procedures established by each such service
organization. The Fund has no redemption charge, but service organizations may
impose transaction fees or other charges relating to the redemption of Fund
shares. Individual shareholders should determine from their service organiza-
tions the procedures and charges, if any, that govern redemptions.
SYSTEMATIC WITHDRAWAL PLAN
If you own shares currently worth at least $10,000, you may establish a System-
atic Withdrawal Plan by completing an 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) 858-4084. 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. A
Systematic Withdrawal Plan may be terminated at any time by you or the Fund. To
obtain an Account Update Form, which you can use to initiate a Systematic With-
drawal Plan, call Nuveen toll-free at (800) 858-4084.
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 securi-
ties or other assets of the Fund in case of an emergency or any time a cash
distribution would impair the liquidity of the Fund to the detriment of the
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.
ACCOUNT MINIMUMS
From time to time, the fund may establish minimum account size requirements.
The fund reserves the right to liquidate your account upon 30 days written
notice if the value of your account falls below an established minimum. The
fund presently has set a minimum balance of $100 unless you have an active unit
trust reinvestment account.
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.
General Information
INVESTOR INQUIRIES
Investor inquiries may be made directly of the Fund in writing or by calling
John Nuveen & Co. Incorporated, the Fund's distributor, toll-free at (800) 858-
4084.
CUSTODIAN, SHAREHOLDER SERVICES AGENT AND TRANSFER AGENT
The custodian of the Fund's assets is The Chase Manhattan Bank, 4 New York Pla-
za, New York, New York 10004. The custodian performs custodial fund accounting
and portfolio accounting services. Shareholder Services, Inc., P.O. Box 5330,
Denver, Colorado 80217-5330, is the transfer, shareholder services and dividend
paying agent for the Fund ("Transfer Agent") and performs bookkeeping, data
processing and administrative services incident to the maintenance of share-
holder accounts. On or about August 10, 1998, Chase Global Funds Services Com-
pany, P.O. Box 5186, New York, New York 10274-5186 will become the Fund's
Transfer Agent.
Nuveen Advisory and the transfer agent rely on computer systems to manage the
fund's investments, process shareholder transactions and provide shareholder
account maintenance. Because of the way computers historically have stored
dates, some of these systems currently may not be able to correctly process
activity occurring in the year 2000. Nuveen Advisory is working with the fund's
service providers to adapt their systems to address this "year 2000 issue."
Nuveen Advisory and the fund expect the necessary work to be completed no later
than December 1999, although we can make no assurance with respect to the sys-
tems of the fund's service providers.
---
13
<PAGE>
CAPITAL STOCK
The Fund was incorporated in Maryland on July 6, 1982. Its 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.
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 1998 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 deduc-
tions and personal exemptions, which were designed to phase out certain bene-
fits 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 itemized 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>
FEDERAL TAX-FREE YIELD
FEDERAL ADJUSTED FEDERAL 2.00% 2.50% 3.00% 3.50% 4.00% 4.50% 5.00%
TAXABLE GROSS TAX ---- ---- ---- ---- ---- ---- ----
INCOME INCOME RATE TAXABLE EQUIVALENT YIELD
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0-42,350 $ 0-124,500 15.0% 2.35 2.94 3.53 4.12 4.71 5.29 5.88
42,350-102,300 0-124,500 28.0 2.78 3.47 4.17 4.86 5.56 6.25 6.94
124,500-186,800 29.0 2.82 3.52 4.23 4.93 5.63 6.34 7.04
102,300-155,050 0-124,500 31.0 2.90 3.62 4.35 5.07 5.80 6.52 7.25
124,500-186,800 32.0 2.94 3.68 4.41 5.15 5.88 6.62 7.35
186,800-309,300 34.5 3.05 3.82 4.58 5.34 6.11 6.87 7.63
155,950-278,450 124,500-186,800 37.0 3.17 3.97 4.76 5.56 6.35 7.14 7.94
186,800-309,300 40.0 3.33 4.17 5.00 5.83 6.67 7.50 8.33
Over 309,300 37.0 3.17 3.97 4.76 5.56 6.35 7.14 7.94
Over 278,450 186,800-309,300 44.0 3.57 4.46 5.36 6.25 7.14 8.04 8.93
Over 309,300 41.0 3.39 4.24 5.08 5.93 6.78 7.63 8.47
- --------------------------------------------------------------------------------------
</TABLE>
Marginal tax rates for single taxpayers with one personal exemption
<TABLE>
<CAPTION>
COMBINED
FEDERAL STATE TAX-FREE YIELD
FEDERAL ADJUSTED AND 2.00% 2.50% 3.00% 3.50% 4.00% 4.50% 5.00%
TAXABLE GROSS FEDERAL ---- ---- ---- ---- ---- ---- ----
INCOME INCOME TAX RATE TAXABLE EQUIVALENT YIELD
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0 -
25,350 $ 0 - 124,500 15.0% 2.35 2.94 3.53 4.12 4.71 5.29 5.88
25,350 - 61,400 0 - 124,500 28.0 2.78 3.47 4.17 4.86 5.56 6.25 6.94
61,400 - 128,100 0 - 124,500 31.0 2.90 3.62 4.35 5.07 5.80 6.52 7.25
124,500 - 247,000 32.5 2.96 3.70 4.44 5.19 5.93 6.67 7.41
128,100 - 278,450 124,500 - 247,000 38.0 3.23 4.03 4.84 5.65 6.45 7.26 8.06
Over 247,000 37.0 3.17 3.97 4.76 5.56 6.35 7.14 7.94
Over 278,450 Over 247,000 41.0 3.39 4.24 5.08 5.93 6.78 7.63 8.47
- ------------------------------------------------------------------------------------------
</TABLE>
---
14
<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
4 New York Plaza
New York, New York 10004
<PAGE>
Serving Investors
for Generations
[PHOTO APPEARS HERE]
John Nuveen, Sr.
Since our founding in 1898, John Nuveen & Co. has been synonymous with
investments that withstand the test of time. Today, we offer a broad range of
investments designed for mature investors whose portfolios are the principal
source of their ongoing financial security. More than 1.3 million investors have
entrusted Nuveen to help them maintain the lifestyle they currently enjoy.
A value investing approach -- purchasing securities of strong companies and
communities that represent good long-term value -- is the cornerstone of
Nuveen's investment philosophy. It is a careful, long-term strategy that offers
the potential for attractive returns with moderated risk. Successful value
investing begins with in-depth research and a discerning eye for marketplace
opportunity. Nuveen's team of investment professionals is backed by the
discipline, resources and expertise of almost a century of investment
experience, including one of the most recognized research departments in the
industry.
To meet the unique circumstances and financial planning needs of mature
investors, Nuveen offers a wide array of taxable and tax-free investment
products -- including equity and fixed-income mutual funds, unit trusts,
exchange-traded funds, individual managed account services, and cash management
products.
To find out more about how Nuveen investment products and services can help you
preserve your financial security, talk with your financial adviser, or call us
at (800) 621-7227 for more information, including a prospectus where applicable.
Please read that information carefully before you invest.
[NUVEEN LOGO]
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
(800) 621-7227
www.nuveen.com
MPR-1-6.98
<PAGE>
PART B--STATEMENT OF ADDITIONAL INFORMATION
NUVEEN TAX-FREE RESERVES, INC.
333 West Wacker Drive
Chicago, Illinois 60606
<PAGE>
LOGO
Statement of Additional Information
June 24, 1998
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 June 24, 1998.
<TABLE>
<S> <C>
Table of Contents Page
- ------------------------------------------------------------
Fundamental Policies and Investment Portfolio 2
- ------------------------------------------------------------
Management 9
- ------------------------------------------------------------
Investment Adviser and Investment Management Agreement 13
- ------------------------------------------------------------
Portfolio Transactions 14
- ------------------------------------------------------------
Net Asset Value 15
- ------------------------------------------------------------
Tax Matters 16
- ------------------------------------------------------------
Distribution and Service Plan 20
- ------------------------------------------------------------
Yield Information 22
- ------------------------------------------------------------
Independent Public Accountants and Custodian 23
- ------------------------------------------------------------
</TABLE>
The audited financial statements for the fiscal year ended February 28, 1998
appearing in the Fund's Annual Report are incorporated herein by reference. The
Annual Report accompanies this Statement of Additional Information.
<TABLE>
<S> <C> <C>
Principal Underwriter Investment Adviser Independent Public Accountants
John Nuveen & Co. Incorporated Nuveen Advisory Corp., for the Fund
Subsidiary of John Nuveen & Arthur Andersen LLP
Chicago: Co. Incorporated 33 West Monroe Street
333 West Wacker Drive 333 West Wacker Drive Chicago, Illinois 60603
Chicago, Illinois 60606 Chicago, Illinois 60606
(312) 917-7700
Custodian
New York: The Chase Manhattan Bank
10 East 50th Street 4 New York Plaza
New York, New York 10022 New York, New York 10004
(212) 207-2000
</TABLE>
<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.
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.
8
<PAGE>
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 eight 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 six of whom are "disinterested
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 PRINCIPAL OCCUPATION
NAME AND ADDRESS AGE OFFICES WITH FUND DURING PAST FIVE YEARS
- --------------------------------------------------------------------------------
<C> <C> <C> <S>
Timothy R. Schwertfeger* 49 Chairman of the Board Chairman since July 1,
333 West Wacker Drive and Director 1996 of The John Nuveen
Chicago, IL 60606 Company, John Nuveen &
Co. Incorporated, Nuveen
Advisory Corp. and
Nuveen Institutional
Advisory Corp., prior
thereto Executive Vice
President and Director
of The John Nuveen
Company and John Nuveen
& Co. Incorporated;
Director of Nuveen
Advisory Corp. (since
1992) and Nuveen
Institutional Advisory
Corp. (since October
1992); Chairman and
Director (since January
1997) of Nuveen Asset
Management, Inc.;
Director (since 1996) of
Institutional Capital
Corporation.
- --------------------------------------------------------------------------------
Anthony T. Dean* 53 President and President since July 1,
333 West Wacker Drive Director 1996 of The John Nuveen
Chicago, IL 60606 Company, John Nuveen &
Co. Incorporated, Nuveen
Advisory Corp. and
Nuveen Institutional
Advisory Corp.; prior
thereto, Executive Vice
President and
Director of The John
Nuveen Company, John
Nuveen & Co.
Incorporated, Nuveen
Advisory Corp. (since
October 1992) and Nuveen
Institutional Advisory
Corp. (since October
1992); President and
Director (since January
1997) of Nuveen Asset
Management, Inc.;
Chairman and Director
(since 1997) of
Rittenhouse Financial
Services, Inc.
- --------------------------------------------------------------------------------
Robert P. Bremner 57 Director Private Investor and
3725 Huntington Street, N.W. Management Consultant.
Washington, D.C. 20015
- --------------------------------------------------------------------------------
Lawrence H. Brown 63 Director Retired (August 1989) as
201 Michigan Avenue Senior Vice President of
Highwood, IL 60040 The Northern Trust
Company.
- --------------------------------------------------------------------------------
Anne E. Impellizzeri 65 Director President and Chief
3 West 29th Street Executive Officer of
New York, NY 10001 Blanton-Peale,
Institutes of Religion
and Health (since
December 1990).
- --------------------------------------------------------------------------------
Peter R. Sawers 65 Director Adjunct Professor of
22 The Landmark Business and Economics,
Northfield, IL 60093 University of Dubuque,
Iowa; Adjunct Professor,
Lake Forest Graduate
School of Management,
Lake Forest, Illinois.
</TABLE>
- --------------------------------------------------------------------------------
9
<PAGE>
<TABLE>
- ----------------------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL OCCUPATIONS
NAME AND ADDRESS AGE POSITIONS AND OFFICES WITH FUND DURING PAST FIVE YEARS
- ----------------------------------------------------------------------------------------------
<C> <C> <C> <S>
William J. Schneider 53 Director Senior Partner, Miller-
4000 Miller-Valentine Ct. Valentine Partners, Vice
P.O. Box 744 President, Miller-
Dayton, OH 45401 Valentine Realty, Inc.
- ----------------------------------------------------------------------------------------------
Judith M. Stockdale 50 Director Executive Director,
35 E. Wacker Drive Gaylord and Dorothy
Suite 2600 Donnelley Foundation
Chicago, IL 60601 (since 1994); prior
thereto, Executive
Director, Great Lakes
Protection Fund (from
1990 to 1994).
- --------------------------------------------------------------------------------
Bruce P. Bedford 58 Executive Vice President Executive Vice President
333 West Wacker Drive of John Nuveen & Co.
Chicago, IL 60606 Incorporated, Nuveen
Advisory Corp. and
Nuveen
Institutional Advisory
Corp. (since January
1997); prior thereto,
Chairman and CEO of
Flagship Resources Inc.
and Flagship Financial
Inc. and the Flagship
funds.
- --------------------------------------------------------------------------------
Alan G. Berkshire 37 Vice President and Assistant Secretary Vice President and
333 West Wacker Drive General Counsel (since
Chicago, IL 60606 September 1997) and
Secretary (since May
1998) of The John Nuveen
Company, John Nuveen &
Co. Incorporated, Nuveen
Advisory Corp., and
Nuveen Institutional
Advisory Corp. prior
thereto, Partner in the
law firm of Kirkland &
Ellis.
- --------------------------------------------------------------------------------
Michael S. Davern 40 Vice President Vice President of Nuveen
333 West Wacker Drive Advisory Corp. (since
Chicago, IL 60606 January 1997); prior
thereto, Vice President
and Portfolio Manager
(since September 1991)
of Flagship Financial.
- ----------------------------------------------------------------------------------------------
Lorna C. Ferguson 53 Vice President Vice President of John
333 West Wacker Drive Nuveen & Co.
Chicago, IL 60606 Incorporated; Vice
President (since January
1998) of Nuveen Advisory
Corp. and Nuveen
Institutional Advisory
Corp.
- ----------------------------------------------------------------------------------------------
William M. Fitzgerald 34 Vice President Vice President of Nuveen
333 West Wacker Drive Advisory Corp. (since
Chicago, IL 60606 December 1995);
Assistant Vice President
of Nuveen Advisory Corp.
(from September 1992 to
December 1995), prior
thereto Assistant
Portfolio Manager of
Nuveen Advisory Corp.
- ----------------------------------------------------------------------------------------------
Kathleen M. Flanagan 51 Vice President Vice President of John
333 West Wacker Drive Nuveen & Co.
Chicago, IL 60606 Incorporated.
- ----------------------------------------------------------------------------------------------
Stephen D. Foy 44 Vice President and Controller Vice President of John
333 West Wacker Drive Nuveen & Co.
Chicago, IL 60606 Incorporated.
</TABLE>
- --------------------------------------------------------------------------------
10
<PAGE>
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS
NAME AND ADDRESS AGE OFFICES WITH FUND DURING PAST FIVE YEARS
- -------------------------------------------------------------------------------
<C> <C> <C> <S>
J. Thomas Futrell 42 Vice President Vice President of Nuveen
333 West Wacker Drive Advisory Corp.
Chicago, IL 60606
- -------------------------------------------------------------------------------
Richard A. Huber 35 Vice President Vice President of Nuveen
333 West Wacker Drive Advisory Corp. (since January
Chicago, IL 60606 1997); prior thereto, Vice
President and Portfolio
Manager of Flagship Financial.
- -------------------------------------------------------------------------------
Steven J. Krupa 40 Vice President Vice President of Nuveen
333 West Wacker Drive Advisory Corp.
Chicago, IL 60606
- -------------------------------------------------------------------------------
Anna R. Kucinskis 52 Vice President Vice President of John Nuveen
333 West Wacker Drive & Co. Incorporated.
Chicago, IL 60606
- -------------------------------------------------------------------------------
Larry W. Martin 46 Vice President and Vice President, Assistant
333 West Wacker Drive Assistant Secretary Secretary and Assistant
Chicago, IL 60606 General 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 of Nuveen
Institutional Advisory Corp.;
Assistant Secretary of The
John Nuveen Company.
- -------------------------------------------------------------------------------
Edward F. Neild, IV 32 Vice President Vice President (since
333 West Wacker Drive September 1996), previously
Chicago, IL 60606 Assistant Vice President
(since December 1993) of
Nuveen Advisory Corp.,
Portfolio Manager prior
thereto (since January 1992);
Vice President (since
September 1996), previously
Assistant Vice President
(since May 1995) of Nuveen
Institutional Advisory Corp.,
Portfolio Manager prior
thereto.
- -------------------------------------------------------------------------------
Walter K. Parker 49 Vice President Vice President of Nuveen
333 West Wacker Drive Advisory Corp. (since January
Chicago, IL 60606 1997); prior thereto, Vice
President and Portfolio
Manager (since July 1994) of
Flagship Financial; Portfolio
Manager and CIO Trust Investor
for PNC Bank.
- -------------------------------------------------------------------------------
Stephen S. Peterson 40 Vice President Vice President (since
333 West Wacker Drive September 1997), previously
Chicago, IL 60606 Assistant Vice President
(since September 1996) of
Nuveen Advisory Corp.,
Portfolio Manager prior
thereto.
- -------------------------------------------------------------------------------
Stuart W. Rogers 42 Vice President Vice President of John Nuveen
333 West Wacker Drive & Co. Incorporated.
Chicago, IL 60606
- -------------------------------------------------------------------------------
Thomas C. Spalding, Jr. 46 Vice President Vice President of Nuveen
333 West Wacker Drive Advisory Corp. and Nuveen
Chicago, IL 60606 Institutional Advisory Corp.;
Chartered Financial Analyst.
- -------------------------------------------------------------------------------
H. William Stabenow 63 Vice President and Vice President and Treasurer
333 West Wacker Drive Treasurer of The John Nuveen Company,
Chicago, IL 60606 John Nuveen & Co.
Incorporated, Nuveen Advisory
Corp. and Nuveen Institutional
Advisory Corp.
</TABLE>
- --------------------------------------------------------------------------------
11
<PAGE>
<TABLE>
- -----------------------------------------------------------------------------------------
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS
NAME AND ADDRESS AGE OFFICES WITH FUND DURING PAST FIVE YEARS
- -----------------------------------------------------------------------------------------
<C> <C> <C> <S>
William S. Swanson 32 Vice President Vice President of John Nuveen & Co.
333 West Wacker Drive Incorporated (since October 1997), prior
Chicago, IL 60606 thereto, Assistant Vice President (since
September 1996); formerly, Associate of
John Nuveen & Co. Incorporated.
- -----------------------------------------------------------------------------------------
Jan E. Terbrueggen 42 Vice President Vice President Nuveen Advisory Corp. (since
333 West Wacker Drive January 1997);
Chicago, IL 60606 prior thereto, Vice President and Portfolio
Manager of Flagship Financial.
- -----------------------------------------------------------------------------------------
Gifford R. Zimmerman 41 Vice President and Vice President (since September 1992),
333 West Wacker Drive Secretary Assistant Secretary, and Associate General
Chicago, IL 60606 Counsel formerly Assistant General 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 of Nuveen Institutional Advisory
Corp.
- --------------------------------------------------------------------------------
</TABLE>
Anthony T. Dean, Timothy R. Schwertfeger and Peter R. Sawers serve as members
of the Executive 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 directors, or trustees, as the case may be, of 42
Nuveen open-end portfolios and 52 Nuveen closed-end funds.
The following table sets forth compensation paid by Nuveen Tax-Free Reserves,
Inc. during the fiscal year ended February 28, 1998 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 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
- --------------------------------------------------------------------------------
<S> <C> <C>
Anthony T. Dean................................ $ 0 $ 0
Timothy R. Schwertfeger........................ 0 0
Robert P. Bremner.............................. 869 58,780
Lawrence H. Brown.............................. 909 76,000
Anne E. Impellizzeri........................... 860 71,750
Margaret K. Rosenheim*......................... 608(2) 47,405(3)
Peter R. Sawers................................ 860 71,750
William J. Schneider........................... 869 58,780
Judith M. Stockdale............................ 394 32,000(1)
</TABLE>
- --------
*Former trustee, retired July, 1997.
(1) First payment was in July, 1997.
(2) Includes $49 in interest earned on deferred compensation from prior years.
(3) Includes $1,655 in interest earned on deferred compensation from prior
years.
Directors who are not affiliated with Nuveen or Nuveen Advisory will receive a
fee.
The Fund requires no employees other than its officers, all of whom are compen-
sated by Nuveen.
On May 19, 1998, the officers and directors of the Fund as a group owned less
than 1% of the outstanding shares of the Fund. On May 19, 1998, Elaine D.
Sammons, 4242 Lomo Alto Dr., Dallas, TX 75219-1538 owned of record 9.33% shares
of the Fund.
12
<PAGE>
INVESTMENT ADVISER AND INVESTMENT MANAGEMENT AGREEMENT
Nuveen Advisory acts as investment adviser for the Fund and in such capacity
manages the investment and reinvestment of the assets of the Fund. Nuveen Advi-
sory also administers the 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. 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 ex-
penses in an amount necessary to prevent the Fund's total expenses in any fis-
cal 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 28, 1998
amounted to $1,196,845, after giving effect to fee waivers and expense reim-
bursements of $178,780. The net management fees for the fiscal years ended Feb-
ruary 29, 1997 and February 28, 1996, amounted to $1,377,941 and $1,566,356 re-
spectively. As discussed in the Prospectus, subject to the expense limitations
of the Investment Management Agreement, the Fund is responsible for payment of
certain of the costs and expenses of its operations, including its share of
payments under the Distribution and Service Plan.
Nuveen Advisory is a wholly-owned subsidiary of John Nuveen & Co. Incorporated
("Nuveen"), the Fund's principal underwriter. In 1961, Nuveen began sponsoring
the Nuveen Tax-Exempt Unit Trust and since that time has issued more than $37
billion in taxable and tax-exempt unit trusts, including over $12 billion in
tax-exempt insured unit trusts. In addition, the Nuveen open-end and closed-end
funds held approximately $38 billion in securities under management as of the
date of this Statement. Over 1,000,000 individuals have invested to date in
Nuveen's funds and trusts. Founded in 1898, Nuveen is a subsidiary of The John
Nuveen Company which, in turn, is approximately 78% owned by The St. Paul Com-
panies, Inc. ("St. Paul"). St. Paul is located in St. Paul, Minnesota and is
principally engaged in providing property-liability insurance through subsidi-
aries.
Nuveen Advisory's portfolio managers call upon the resources of Nuveen's Re-
search Department. The Nuveen Research Department reviews more than $100 bil-
lion in municipal bonds every year.
The Fund, the other Nuveen funds, Nuveen Advisory, and other related entities
have adopted a code of ethics which essentially prohibits all Nuveen fund man-
agement personnel, including Nuveen fund portfolio managers, from engaging in
personal investments which compete or interfere with, or attempt to take advan-
tage of, a Fund's anticipated or actual portfolio transactions, and is designed
to assure that the interest of Fund shareholders are placed before the interest
of Nuveen personnel in connection with personal investment transactions.
13
<PAGE>
PORTFOLIO TRANSACTIONS
Nuveen Advisory, in effecting purchases and sales of portfolio securities for
the account of the Fund, will place orders in such manner as, in the opinion of
management, will offer the best price and market for the execution of each
transaction. Portfolio securities will normally be purchased directly from an
underwriter or in the over-the-counter market from the principal dealers in
such securities, unless it appears that a better price or execution may be ob-
tained elsewhere. Portfolio securities will not be purchased from Nuveen or its
affiliates except in compliance with the Investment Company Act of 1940.
The Fund since its inception has effected all portfolio transactions on a prin-
cipal (as opposed to an agency) basis and, accordingly, has not paid any bro-
kerage commissions.
Purchases from underwriters include a commission or concession paid by the is-
suer to the underwriter, and purchases from dealers include the spread between
the bid and asked price. Given the best price and execution obtainable, it is
the practice of the Fund to select dealers which, in addition, furnish research
information (primarily credit analyses of issuers) and statistical and other
services to Nuveen Advisory. It is not possible to place a dollar value on in-
formation and statistical and other services received from dealers. Since it is
only supplementary to Nuveen Advisory's own research efforts, the receipt of
research information is not expected to reduce significantly Nuveen Advisory's
expenses. Any research benefits obtained are available to all of Nuveen
Advisory's other clients. While Nuveen Advisory will be primarily responsible
for the placement of the Fund's business, the policies and practices of Nuveen
Advisory in this regard must be consistent with the foregoing and will, at all
times, be subject to review by the Board of 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
14
<PAGE>
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 pursuant 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, the Fund's custodian, as of 12:00
noon Eastern Time, (1) on each day on which the Federal Reserve Bank of Boston
is normally open and (2) on any day during which there is sufficient degree of
trading in the Fund's portfolio securities that the current net asset value of
the Fund shares might be materially affected by such changes in the value of
the portfolio securities. The Federal Reserve Bank of Boston is not open and
the Fund similarly will not be open on New Year's Day, Martin Luther King's
Birthday, Washington's Birthday, Memorial Day, Independence Day, Labor Day, Co-
lumbus Day, Veteran's Day, Thanksgiving Day and Christmas Day. The net asset
value per share will be computed by dividing the value of the portfolio securi-
ties held by the Fund, plus cash or other assets, less liabilities, by the to-
tal number of shares outstanding at such time.
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.
15
<PAGE>
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 exceeds 1/2 of 1%, the Board of Di-
rectors will promptly consider what action, if any, will be initiated. In the
event the Board of Directors determines that a deviation exists which may re-
sult in material dilution or other unfair results to investors or existing
shareholders, they have agreed to take such corrective 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 ma-
turity; withholding dividends or payments of distributions from capital or cap-
ital 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 Morgan, Lewis & Bockius LLP, Washington, D.C., counsel to the Fund.
As described in the Prospectus, the Fund intends to qualify, as it has in prior
years, under Subchapter M of the Internal Revenue Code of 1986, as amended,
(the "Code"), for tax treatment as a regulated investment company. In order to
qualify as a regulated investment company, the Fund must satisfy certain
requirements relating to the source of its income, diversification of its
assets, and distributions of its income to shareholders. First, the Fund must
derive at least 90% of its annual gross income (including tax-exempt interest)
from dividends, interest, payments with respect to securities loans, gains from
the sale or other disposition of stock or securities, foreign currencies or
other income (including but not limited to gains from options and futures)
derived with respect to its business of investing in such stock or securities
(the "90% gross income test"). Second, the Fund must diversify its holdings so
that, at the close of each quarter of its taxable year, (i) at least 50% of the
value of its total assets is comprised of cash, cash items, United States
Government securities, securities of other regulated investment companies and
other securities limited in respect of any one issuer to an amount not greater
in value than 5% of the value of the Fund's total assets and to not more than
10% of the
16
<PAGE>
outstanding voting securities of such issuer, and (ii) not more than 25% of the
value of the total assets is invested in the securities of any one issuer
(other than United States Government securities and securities of other
regulated investment companies) or two or more issuers controlled by the Fund
and engaged in the same, similar or related trades or businesses.
As a regulated investment company, the Fund will not be subject to federal in-
come tax on the portion of its net investment income and net realized gain that
is currently distributed to shareholders in any taxable year for which the Fund
distributes at least 90% of the sum of (i) its "investment company taxable in-
come" (which includes dividends, taxable interest, taxable original issue dis-
count and market discount income, income from securities lending, net short-
term capital gain in excess of long-term capital loss, and any other taxable
income other than "net capital gain" (the excess of its net long-term capital
gain over its short-term capital loss) and is reduced by deductible expenses)
and (ii) its "net tax-exempt interest" (the excess of its gross tax-exempt in-
terest income over certain disallowed deductions).
The Fund also intends to satisfy conditions (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 consists primarily
of interest, none of its dividends, whether or not treated as exempt-interest
dividends, is expected to qualify under the Internal Revenue Code for the
dividends received deductions for corporations.
If 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
17
<PAGE>
and paid during the following January, will be treated as having been distrib-
uted by the Fund (and received by the shareholders) on December 31.
The redemption or exchange of the shares of the Fund is not expected to result
in capital gain or loss to the shareholders because the Fund's net asset value
is expected to remain constant at $1.00 per share. To the extent that the
Fund's net asset value is greater or less than $1.00 per share, redemptions or
exchanges may result in capital gain or loss to the shareholder.
In order to avoid a 4% federal excise tax, the Fund must distribute or be
deemed to have distributed by December 31 of each calendar year at least 98% of
its taxable ordinary income for such year, at least
98% of the excess of its realized capital gains over its realized capital
losses (generally computed on the basis of the one-year period ending on Octo-
ber 31 of such year) and 100% of any taxable ordinary income and the excess of
realized capital gains over realized capital losses for the prior year that was
not distributed during such year and on which the Fund paid no federal income
tax. The Fund intends to make timely distributions in compliance with these re-
quirements and consequently it is anticipated that it generally will not be re-
quired to pay the excise tax.
If in any year the Fund should fail to qualify under Subchapter M for tax
treatment as a regulated investment company, the Fund would incur a regular
corporate federal income tax upon its income for that year, other than interest
income from 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.
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). This includes a partnership and each of its partners (includ-
ing their spouses and minor children) and an S corporation and each of its
shareholders (and their spouses and minor children). Various combinations of
these relationships may also constitute "related persons" under the Code. For
additional information, investors should consult their tax advisers before in-
vesting in the Fund.
Federal tax law imposes an alternative minimum tax with respect to both corpo-
rations and individuals. Interest on certain 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 alterna-
18
<PAGE>
tive minimum taxable income. To the extent that the Fund receives income from
Municipal Obligations subject to the alternative minimum tax, a portion of the
dividends paid by it, although otherwise
exempt from federal income tax, will be taxable to shareholders to the extent
that their tax liability is determined under the alternative minimum tax re-
gime. 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.
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 the Fund
may be considered to have been made with borrowed funds even though such funds
are not directly traceable to the purchase of shares.
The Fund is required in certain circumstances to withhold 31% of taxable divi-
dends and certain other payments paid to non-corporate holders of shares who
have not furnished to the Fund their correct taxpayer identification number (in
the case of individuals, their social security number) and certain certifi-
cates, or who are otherwise subject to back-up withholding.
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.
19
<PAGE>
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 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 agree-
ments 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 Agree-
ments with organizations who render such services. Service payments to such or-
ganizations 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. Expenses that are
incurred under the Plan in a given fiscal year but not reimbursed by the Fund
in that year are not carried over to future years. For the fiscal year ended
February 28, 1998, the Fund paid fees to service organizations under the Plan
in the amount of $118,178.
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
20
<PAGE>
called for the purpose of voting on the Plan. The Plan may be continued only
if the Directors who vote to approve such continuance conclude, in the exer-
cise of reasonable business judgment and in light of their fiduciary duties
under applicable law, that there is a reasonable likelihood that the Plan will
benefit the Fund and its shareholders. The Plan is intended to benefit the Fund
by promoting the sale of Fund shares, which in turn leads to economies of scale
and helps assure the continued viability of the Fund. The Plan may not be
amended to increase materially the cost which the Fund may bear under the Plan
without shareholder approval, and any other material 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.
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.
21
<PAGE>
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 28, 1998 were
2.86% and 2.90%, respectively. These various measures of performance are de-
scribed 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 re-
sult (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 income per share in-
cludes its accrued interest income plus or minus amortized purchase discount or
premium less accrued expenses, but does not include realized capital gains or
losses or unrealized appreciation or depreciation of investments.
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
22
<PAGE>
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.
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.
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, 4 New York Pla-
za, New York, New York 10004.
23
MAI-T-F-RSRV
<PAGE>
NUVEEN
Money Market
Funds
February 28, 1998
Annual Report
Dependable, tax-free income
to help you keep more of
what you earn.
[PHOTO APPEARS HERE]
Reserves
California
Massachusetts
New York
<PAGE>
Contents
1 Dear Shareholder
3 Reserves Performance Overview
4 California Performance Overview
5 Massachusetts Performance Overview
6 New York Performance Overview
7 Portfolio of Investments
18 Statement of Net Assets
20 Statement of Operations
24 Statement of Changes in Net Assets
31 Notes to Financial Statements
34 Financial Highlights
42 Report of Independent Public Accountants
44 Building Better Portfolios
45 Fund Information
<PAGE>
Dear Shareholder
[PHOTO OF TIMOTHY R. SCHWERTFEGER APPEARS HERE]
Timothy R. Schwertfeger
Chairman of the Board
Over the past two years, many financial markets have been unusually strong.
Short-term rates trended higher early in 1997 on expectations that the Federal
Reserve Board would take steps to tighten monetary policy and slow the pace of
economic growth. In March, the Fed raised its target rate for the federal funds
rate by 25 basis points, but then took no further action. Short-term securities
reversed course and yields trended downward for the remainder of the funds'
fiscal year. Still, falling commodity prices kept producer prices in check,
while low import prices--due in part to the weakness in Asian markets--limited
U.S. companies' ability to raise consumer prices. This combination has kept
inflation subdued and the Federal Reserve "on hold".
Performance Review
Your Nuveen tax-free money market fund continued to generate tax-free income
while preserving net asset value stability. As of the end of February, investors
were receiving 7-day annualized tax-free yields that ranged from 2.75% to 3.04%,
equivalent to taxable yields of between 3.99% and 4.41% for investors in the 31%
federal income tax bracket. When state taxes are taken into account, the
advantage of tax-free investing is even more apparent.
Portfolio Adjustments
Beginning in the fourth quarter of 1997, many Asian countries experienced
economic problems and severe currency devaluations. We continue to watch the
Asian situation--and Japanese banks in particular--for any additional credit
erosions and possible rating changes.
During this time, the Nuveen Money Market Funds, working with Nuveen Research,
continued to closely monitor those issues in the portfolios that were
additionally secured by letters of credit from Japanese banks. While others were
eliminating all Japanese-bank letters of credit, the funds maintained their
current positions based on our credit analysis.
With the funds' maturities averaging between 30 and 58 days, we were able to
selectively participate in the large new issue municipal note
Wealth takes
a lifetime
to build.
Once achieved,
it should be
preserved.
1
<PAGE>
"Nuveen
money market
funds provide
an excellent
balance to
other stock
and bond
investments."
calendar. During the third quarter of 1997, many short-term buyers seemed
reluctant to extend their average maturities, expecting the Federal Reserve to
raise rates. The funds were able to buy tax-exempt notes at historically cheap
levels which proved to be a wise move since the Fed did not raise rates. As a
result, the funds' average maturities during the third quarter of 1997 were
generally increased to the upper end of their ranges.
Short-Term Outlook
Looking forward, it's likely that upward pressure on wages may ultimately push
inflation up a bit. It's still uncertain whether the Fed will deem it necessary
to raise short-term rates, and if they hold the line, money market rates should
remain relatively stable in 1998.
Helping You Build A Better Portfolio
The events of 1997 have also focused renewed attention on the need for
diversification and appropriate asset allocation. In addition to their well-
known benefits--stability of principal and higher yields than bank accounts--
money market funds can also play an important role in your long-term investment
plan. Stock market volatility, especially late in the year, provided a vivid
illustration of the steadying effect that short-term investments can provide in
a well-constructed investment portfolio. Nuveen money market funds provide an
excellent balance to other stock and bond investments. Your financial adviser
can introduce you to a variety of other Nuveen products and services to round
out your portfolio of core investments, including the new Nuveen Rittenhouse
Growth Fund, a blue chip equity mutual fund that provides a tax-efficient
approach to building and sustaining wealth.
On behalf of everyone at Nuveen, I thank you for your continued confidence in us
and our family of investments.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
April 15, 1998
2
<PAGE>
Nuveen Tax-Free Reserves, Inc.
Performance Overview
As of February 28, 1998
Fund Highlights
Inception Date 11/82
Net Assets ($000) $270,723
Average Weighted Maturity (Days) 42.1
- ----------------------------------------------------------
Tax-Free Yields
SEC 7-Day Yield 2.86%
SEC 30-Day Yield 2.75%
- ----------------------------------------------------------
Taxable Equivalent Yields
SEC 7-Day Yield 4.14%
SEC 30-Day Yield 3.99%
- ----------------------------------------------------------
Based on a federal tax rate of 31%; represents the yield from a taxable
investment necessary to equal the yield of the Nuveen fund on an after-tax
basis.
Top 5 Sectors
Health Care 18%
Utilities 18%
Tax Obligation (General) 16%
Long Term Care 10%
Tax Obligation (Limited) 7%
- ----------------------------------------------------------
1997-1998 Index Comparison
[MOUNTAIN CHART APPEARS HERE]
- --------------------------------------------------------------------------------
1997-1998 Index Comparison
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
IBC Donoghue Retail Tax-Exempt Money Market Fund Average Nuveen Tax-Free Reserves, Inc. 30-Day Yield
<S> <C> <C>
Feb 2.81 2.83
Mar 2.68 2.71
Apr 3.02 3.07
May 3.33 3.36
Jun 3.2 3.22
Jul 3.02 3.04
Aug 2.95 2.94
Sep 3.07 3.1
Oct 3.05 3.09
Nov 3.11 3.16
Dec 3.12 3.17
Jan 2.99 3.01
Feb 2.74 2.77
</TABLE>
[_] IBC Donoghue Retail Tax-Exempt Money Market Fund Average
[_] Nuveen Tax-Free Reserves, Inc. 30-Day Yield
Past performance is not predictive of future performance.
3
<PAGE>
Nuveen California Tax-Free Money Market Fund
Performance Overview
As of February 28, 1998
Fund Highlights
Inception Date 3/86
Net Assets ($000) $160,495
Average Weighted Maturity (Days) 30.1
- ----------------------------------------------------------
Tax-Free Yields
SEC 7-Day Yield 3.04%
SEC 30-Day Yield 2.85%
- ----------------------------------------------------------
Taxable Equivalent Yields
SEC 7-Day Yield 4.86%
SEC 30-Day Yield 4.55%
- ----------------------------------------------------------
Based on a combined federal and state income tax rate of 37.4%; represents the
yield from a taxable investment necessary to equal the yield of the Nuveen fund
on an after-tax basis.
Top 5 Sectors
Tax Obligation (Limited) 25%
Water and Sewer 19%
Housing (Multifamily) 15%
Health Care 14%
Tax Obligation (General) 12%
- ----------------------------------------------------------
1997-1998 Index Comparison
[MOUNTAIN CHART APPEARS HERE]
<TABLE>
<CAPTION>
IBC Donoghue California
Nuveen California Retail Tax-Exempt Money Market
30-Day Yield Fund Average
----------------- ------------------------------
<S> <C> <C>
Feb 2.89 2.76
Mar 2.67 2.6
Apr 3.21 3
May 3.57 3.32
Jun 3.38 3.15
Jul 3.11 2.92
Aug 2.98 2.8
Sep 3.17 2.98
Oct 3.15 2.97
Nov 3.27 3.05
Dec 3.24 3.04
Jan 3.23 2.85
Feb 2.83 2.59
</TABLE>
[_] Nuveen California 30-Day Yield
[_] IBC Donoghue California Retail Tax-Exempt Money Market Fund Average
Past performance is not predictive of future performance.
4
<PAGE>
Nuveen Massachusetts Tax-Free Money Market Fund
Performance Overview
As of February 28, 1998
Fund Highlights
Inception Date 2/87
Net Assets ($000) $37,583
Average Weighted Maturity (days) 58.2
- ----------------------------------------------------------
Tax-Free Yields
SEC 7-Day Yield 2.75%
SEC 30-Day Yield 2.73%
- ----------------------------------------------------------
Taxable Equivalent Yields
SEC 7-Day Yield 4.53%
SEC 30-Day Yield 4.50%
- ----------------------------------------------------------
Based on a combined federal and state income tax rate of 39.3%; represents the
yield from a taxable investment necessary to equal the yield of the Nuveen fund
on an after-tax basis.
Top 5 Sectors
Tax Obligation (General) 28%
Education and Civic Organizations 26%
Health Care 22%
Housing (Multifamily) 7%
Long-Term Care 6%
- ----------------------------------------------------------
1997-1998 Index Comparison
[MOUNTAIN CHART APPEARS HERE]
<TABLE>
<CAPTION>
Nuveen Massachusetts 30-Day Yield IBC Donoghue Massachusetts Retail Tax-Exempt Money Market Fund Average
<S> <C> <C> <C> <C>
Feb. 1997 2.81 2.8
Mar. 1997 2.61 2.68
Apr. 1997 3.12 3.06
May. 1997 3.43 3.33
Jun. 1997 3.29 3.18
Jul. 1997 3.09 3.04
Aug. 1997 3.00 2.94
Sep. 1997 3.13 3.05
Oct. 1997 3.04 3.03
Nov. 1997 3.2 3.1
Dec. 1997 3.12 3.08
Jan. 1998 2.97 2.91
Feb. 1998 2.71 2.65
</TABLE>
[_] Nuveen Massachusetts 30-Day Yield
[_] IBC Donoghue Massachusetts Retail Tax-Exempt Money Market Fund Average
Past performance is not predictive of future performance.
5
<PAGE>
Nuveen New York Tax-Free Money Market Fund
Performance Overview
As of February 28, 1998
Fund Highlights
Inception Date 2/87
Net Assets ($000) $30,276
Average Weighted Maturity (days) 33.0
- ----------------------------------------------------------
Tax-Free Yields
SEC 7-Day Yield 2.84%
SEC 30-Day Yield 2.69%
- ----------------------------------------------------------
Taxable Equivalent Yields
SEC 7-Day Yield 4.42%
SEC 30-Day Yield 4.18%
- ----------------------------------------------------------
Based on a combined federal and state income tax rate of 35.7%; represents the
yield from a taxable investment necessary to equal the yield of the Nuveen fund
on an after-tax basis.
Top 5 Sectors
Tax Obligation (General) 20%
Education and Civic Organizations 19%
Health Care 10%
Tax Obligation (Limited) 10%
Consumer Cyclical 9%
- ----------------------------------------------------------
1997-1998 Index Comparison
[MOUNTAIN CHART APPEARS HERE]
1997-1998 Index Comparison
[MOUNTAIN CHART APPEARS HERE]
<TABLE>
<CAPTION>
Nuveen New York IBC Donoghue New York
30-Day Yield Retail Tax-Exempt
Money Market Fund Average
<S> <C> <C>
Feb. 1997 2.88 2.77
Mar. 1997 2.74 2.63
Apr. 1997 3.2 3.02
May. 1997 3.45 3.32
Jun. 1997 3.31 3.18
Jul. 1997 3.11 2.98
Aug. 1997 3.00 2.87
Sep. 1997 3.15 3.03
Oct. 1997 3.12 3.02
Nov. 1997 3.23 3.13
Dec. 1997 3.21 3.12
Jan. 1998 3.03 2.93
Feb. 1998 2.68 2.68
</TABLE>
[_] Nuveen New York 30-Day Yield
[_] IBC Donoghue New York Retail Tax-Exempt Money Market Fund Average
Past performance is not predictive of future performance.
6
<PAGE>
Portfolio of Investments
February 28, 1998
Reserves
<TABLE>
<CAPTION>
Principal Amortized
Amount Description Ratings* Cost
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Alabama -- 1.0%
$ 2,735,000 Marshall County Special Obligation School Refunding Warrants, Series 1994, A-1+ $2,735,000
Variable Rate Demand Bonds, 3.450%, 2/01/12+
- -----------------------------------------------------------------------------------------------------------------------------------
Arizona -- 5.6%
7,000,000 The Industrial Development Authority of the County of Apache (Arizona), VMIG-1 7,000,000
Pollution Control Revenue Bonds, 1981 Series B (Tucson Electric Power
Company Project), Variable Rate Demand Bonds, 3.750%, 10/01/21+
8,000,000 Mesa Municipal Development Corporation, Special Tax Bonds, Series 1985, VMIG-1 8,000,000
Commercial Paper, 3.200%, 4/09/98
- -----------------------------------------------------------------------------------------------------------------------------------
California -- 1.9%
5,000,000 California State Revenue Anticipation Notes, Series 1997, 4.500%, 6/30/98 MIG-1 5,010,434
- -----------------------------------------------------------------------------------------------------------------------------------
Colorado -- 1.8%
5,000,000 Fort Morgan Water Works and Distribution Enterprise, Water Revenue A-1+ 5,000,000
Bonds, Series 1997, Variable Rate Demand Bonds, 3.450%, 12/01/17+
- -----------------------------------------------------------------------------------------------------------------------------------
District of Columbia -- 3.0%
8,100,000 District of Columbia General Obligation, Series 1992A-2, Variable VMIG-1 8,100,000
Rate Demand Bonds, 3.700%, 10/01/07+
- -----------------------------------------------------------------------------------------------------------------------------------
Florida -- 6.9%
1,400,000 Florida Housing Finance Agency, Multi-Family Housing Revenue A-1 1,400,000
Refunding Bonds, 1989 Series E (Fairmont Oaks Project), Variable Rate
Demand Bonds, 3.650%, 4/01/26+
3,100,000 Pasco County Housing Finance Authority, Multi-Family Housing VMIG-1 3,100,000
Revenue Bonds (Carlton Arms of Magnolia Valley Project), Series 1985,
Variable Rate Demand Bonds, 3.225%, 12/01/07+
4,800,000 Sarasota County Public Hospital District, Sarasota Memorial A-1+ 4,800,000
Hospital Project, Series C, Commercial Paper, 3.400%, 5/14/98
Sunshine State Governmental Financing Commission, Commercial Paper:
3,300,000 3.750%, 3/06/98 VMIG-1 3,300,000
4,000,000 3.550%, 6/23/98 VMIG-1 4,000,000
2,200,000 Volusia County Health Facilities Authority, Health Facilities A-1+ 2,200,000
Revenue Bonds (The Alliance Community for Retirement Living,
Inc. Project), Series 1995, Variable Rate Demand Bonds,
3.800%, 9/01/20+
- -----------------------------------------------------------------------------------------------------------------------------------
Hawaii -- 0.7%
1,800,000 Department of Budget and Finance of the State of Hawaii, Special Purpose A-1 1,800,000
Demand Revenue Bonds (Adventist Health System--West),
Series 1984, Variable Rate Demand Bonds, 3.750%, 9/01/99+
- -----------------------------------------------------------------------------------------------------------------------------------
Illinois -- 15.2%
5,500,000 Illinois Health Facilities Authority, Revenue Bonds, Series 1997 VMIG-1 5,500,000
(Victory Health Services), Commercial Paper, 3.600%, 3/12/98
2,700,000 Illinois Health Facilities Authority, Rush Presbyterian Series 1989A, VMIG-1 2,700,000
Commercial Paper, 3.400%, 5/15/98
7,000,000 Illinois Development Finance Authority, Pollution Control Revenue Bonds P-1 7,000,000
(Diamond-Star Motors Corporation Project), Series 1995,
Variable Rate Demand Bonds, 3.750%, 12/01/08+
</TABLE>
7
<PAGE>
Portfolio of Investments
February 28, 1998
Reserves -- continued
<TABLE>
<CAPTION>
Principal Amortized
Amount Description Ratings* Cost
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Illinois -- continued
$ 2,000,000 Illinois Development Finance Authority, Revenue Bonds, Radiological Society of A-1+ $2,000,000
North America, Series 1997, Variable Rate Demand Bonds, 3.550%, 6/01/17
6,000,000 Illinois Educational Facilities Authority, Adjustable Demand Revenue Bonds, VMIG-1 6,000,000
Shedd Aquarium Society, Series 1987B, Commercial Paper, 3.850%, 7/23/98
3,000,000 City of Chicago, General Obligation Tender Notes, Series 1997, 3.550%, 10/29/98 MIG-1 3,000,000
5,000,000 City of Chicago, General Obligation Tender Notes, Series 1998, 3.550%, 2/04/99 SP-1+ 5,000,000
2,500,000 City of Chicago, Chicago-OOHare International Airport, Special Facility Revenue P-1 2,500,000
Bonds (American Airlines, Inc. Project), Series 1983A, Variable Rate Demand
Bonds, 3.650%, 12/01/17
5,700,000 City of Decatur, Macon County, Illinois, Unit Priced Demand Adjustable Water VMIG-1 5,700,000
Revenue Bonds, Series 1985, Commercial Paper, 4.100%, 3/12/98
1,770,000 Village of Oak Park, Illinois, Variable Rate Demand Revenue Bonds (Lone Tree N/R 1,770,000
Area Girl Scout Council, Inc. Project), Series 1997, 3.600%, 11/01/17
- ---------------------------------------------------------------------------------------------------------------------------
Iowa -- 3.0%
5,000,000 Iowa School Cash Anticipation Program, Iowa School Corporations, Warrant MIG-1 5,010,799
Certificates, 1997-98 Series A Notes, 4.500%, 6/26/98
2,900,000 City of Eddyville, Iowa, Industrial Development Revenue Bonds (Heartland Lysine, N/R 2,900,000
Inc. Project), Series 1985, Variable Rate Demand Bonds, 3.650%, 11/01/03
- ---------------------------------------------------------------------------------------------------------------------------
Kentucky -- 3.3%
9,005,000 Hancock County, Kentucky, Industrial Building Revenue Refunding Bonds (Southwire N/R 9,005,000
Company Project), Series 1990, Variable Rate Demand Bonds, 3.600%, 7/01/10
- ---------------------------------------------------------------------------------------------------------------------------
Louisiana -- 1.5%
4,000,000 Ascension Parish Pollution Control (BASF Wyandotte Corporation), Variable Rate P-1 4,000,000
Demand Bonds, 3.650%, 12/01/05
- ---------------------------------------------------------------------------------------------------------------------------
Massachusetts -- 0.9%
2,400,000 Newton Bond Anticipation Notes, 4.000%, 3/25/98 N/R 2,400,130
- ---------------------------------------------------------------------------------------------------------------------------
Michigan -- 4.7%
7,100,000 Michigan Job Development Authority, Limited Obligation Revenue Bonds (Frankenmuth A-1 7,100,000
Bavarian Inn Motor Lodge Project), Series A, Variable Rate Demand Bonds,
3.875%, 9/01/15
5,000,000 The School District of the City of Kalamazoo, County of Kalamazoo, State of SP-1+ 5,001,803
Michigan, 1997 State Aid Notes (Limited Tax General Obligation), 4.000%, 4/15/98
735,000 The Economic Development Corporation of the City of Warren, Macomb County, P-1 735,000
Michigan, Floating Rate Limited Obligation Revenue Bonds (The Prince Company, Inc.,
Michigan Division Project), Series A, Variable Rate Demand Bonds, 3.600%, 11/01/99
- ---------------------------------------------------------------------------------------------------------------------------
Minnesota -- 1.9%
5,125,000 City of Bloomington, Minnesota, Floating Rate Demand Bonds, Commercial Revenue A-1+ 5,125,000
Bonds (James Avenue Associates Project), Series 1985, Variable Rate Demand
Bonds, 3.450%, 12/01/15
- ---------------------------------------------------------------------------------------------------------------------------
Missouri -- 4.5%
3,000,000 Health and Educational Facilities Authority of the State of Missouri, Health VMIG-1 3,000,000
Facilities Revenue Bonds (Bethesda Barclay), Series 1996A, Variable Rate
Demand Bonds, 3.950%, 8/15/26
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Principal Amortized
Amount Description Ratings* Cost
- ------------------------------------------------------------------------------------------------------------------------
Missouri -- continued
<S> <C> <C> <C>
$ 9,200,000 State Environmental Improvement and Energy Resources Authority of the State of VMIG-1 $ 9,200,000
Missouri, Unit Priced Demand Adjustable Pollution Control Revenue Bonds, Series
1985 A (Union Electric Company), Commercial Paper, 3.200%, 4/08/98
- ------------------------------------------------------------------------------------------------------------------------
New Hampshire -- 2.5%
6,900,000 New Hampshire Higher Educational and Health Facilities Authority, Revenue Bonds, A-1 6,900,000
Hunt Community Issue, Series 1996, Variable Rate Demand Bonds, 3.500%, 5/01/26+
- ------------------------------------------------------------------------------------------------------------------------
North Carolina -- 3.7%
4,650,000 North Carolina Municipal Power Agency, Catawba Electric Revenue, Commercial A-1+ 4,650,000
Paper, Series A, 3.250%, 3/20/98
2,400,000 The Wake County Industrial Facilities and Pollution Control Financing Authority, VMIG-1 2,400,000
Pollution Control Revenue Refunding Bonds, Carolina Power and Light Company
Project, Series 1990B, Variable Rate Demand Bonds, 3.500%, 6/15/14+
3,000,000 The Wake County Industrial Facilities and Pollution Control Financing Authority, A-2 3,000,000
Pollution Control Refunding Bonds (Carolina Power and Light Company Project),
Series 1985C, Commercial Paper, 4.250%, 3/06/98
- ------------------------------------------------------------------------------------------------------------------------
Ohio -- 12.2%
2,555,000 Ohio School Districts, 1998 Cash Flow Borrowing Program, Certificates of MIG-1 2,566,853
Participation, Series A, Tax Anticipation Notes, 4.120%, 12/31/98
8,300,000 Centerville Health Care, Health Care Revenue Bonds (Bethany Lutheran Village VMIG-1 8,300,000
Continuing Care Facilities Expansion Project), Variable Rate Demand Bonds,
3.500%, 5/01/08+
3,600,000 Cuyahoga County, University Hospital of Cleveland, Series 1985, Variable Rate VMIG-1 3,600,000
Demand Bonds, 3.850%, 1/01/16+
3,000,000 Cuyahoga County Hospital, Revenue Refunding Bonds, Cleveland Clinic, Series VMIG-1 3,000,000
1998A, Variable Rate Demand Bonds, 3.400%, 1/01/24+
5,120,000 County of Erie, Ohio, Adjustable Rate Demand Bonds, Health Care Facilities VMIG-1 5,120,000
Revenue Bonds (The Commons of Providence Project), Series 1996 B,
Variable Rate Demand Bonds, 3.560%, 10/01/21+
3,570,000 County of Franklin, Ohio, Floating Rate Demand Bonds, Hospital Financing Revenue N/R 3,570,000
Bonds, Series 1993 (Traditions at Mill Run Project), Variable Rate Demand Bonds,
3.570%, 11/01/14+
5,000,000 County of Lucas, Ohio, Multi-Mode Variable Rate Demand Facilities Improvement VMIG-1 5,000,000
Revenue Bonds, Series 1997 (The Toledo Zoological Society Project), Variable
Rate Demand Bonds, 3.450%, 10/01/05+
1,800,000 County of Ottawa, Ohio, Hospital Facilities, Variable Rate Demand Revenue Bonds, N/R 1,800,000
Series 1997 (Luther Home of Mercy Project), 3.450%, 10/01/17+
- ------------------------------------------------------------------------------------------------------------------------
Pennsylvania -- 5.3%
2,250,000 Butler County Industrial Development Authority (Pennsylvania), Industrial N/R 2,250,000
Development Revenue Bonds (Wise Business Forms, Incorporated Project),
Variable Rate Demand Bonds, Series 1997, 3.510%, 8/01/18+
7,000,000 Dauphin County General Authority (Pennsylvania), Variable Rate Demand Revenue A-1+ 7,000,000
Bonds (All Health Pooled Financing Program), Series A of 1997, 3.450%, 10/01/27+
1,000,000 City of Philadelphia Tax and Revenue Anticipation Notes, Series A of 1997-1998,
4.500%, 6/30/98 MIG-1 1,001,593
4,000,000 City of Philadelphia, Pennsylvania, General Obligation Bonds, Series 1990,
Commercial Paper, 4.100%, 3/12/98 VMIG-2 4,000,000
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Portfolio of Investments
February 28, 1998
Reserves -- continued
Principal Amortized
Amount Description Ratings* Cost
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Tennessee -- 2.4%
$3,500,000 The Industrial Development Board of the County of Jackson, Tennessee, Variable N/R $3,500,000
Rate Industrial Development Demand Revenue Bonds (Esselte Project), Series
1985B, Variable Rate Demand Bonds, 3.750%, 8/01/15+
3,100,000 The Industrial Development Board of the Metropolitan Government of Nashville N/R 3,100,000
and Davidson County (State of Tennessee), Multifamily Housing Revenue
Refunding Bonds (Hickory Trace Apartments Project), Series 1995, Variable
Rate Demand Bonds, 3.450%, 6/01/15+
- ---------------------------------------------------------------------------------------------------------------------------
Texas -- 7.2%
4,000,000 Texas State Tax and Revenue Anticipation Notes, Series 1997A, 4.750%, 8/31/98 MIG-1 4,022,282
7,000,000 Austin (Travis and Williamson Counties), Series A, Austin Combined Utilities, A-1+ 7,000,000
Commercial Paper, 3.000%, 3/11/98
8,500,000 Brownsville Utility System, Commercial Paper, Series A, 3.450%, 5/08/98 A-1+ 8,500,000
- ---------------------------------------------------------------------------------------------------------------------------
Utah -- 1.3%
3,550,000 West Valley City Industrial Development (Johnson Matthey Project), Variable N/R 3,550,000
Rate Demand Bonds, 3.750%, 12/01/11+
- ---------------------------------------------------------------------------------------------------------------------------
Virginia -- 3.3%
3,000,000 Industrial Development Authority of Albemarle County, Virginia, Health A-1 3,000,000
Services Revenue Bonds (The University of Virginia Health Services
Foundation), Series 1996, Variable Rate Demand Bonds, 3.400%, 2/01/26+
2,600,000 The Industrial Development Authority of the City of Norfolk, Floating Rate N/R 2,600,000
Industrial Development Revenue Bonds (Norfolk-Virginia Beach-Portsmouth
MSA Limited Partnership Project), Variable Rate Demand Bonds, 5.525%, 11/01/04+
3,300,000 The Industrial Development Authority of the City of Richmond, Floating N/R 3,300,000
Rate Industrial Development Revenue Bonds (Richmond MSA Limited Partnership
Project), Variable Rate Demand Bonds, 5.525%, 11/01/04+
- ---------------------------------------------------------------------------------------------------------------------------
Washington -- 3.4%
4,900,000 Washington Health Care Facilities Authority, Series 1984 (Adventist A-1 4,900,000
Health System--West/Walla Walla General Hospital), Variable Rate
Demand Bonds, 3.750%, 9/01/09+
4,250,000 Spokane County, Washington, Road Fund, Tax Anticipation Notes, Series SP-1+ 4,256,095
1997, 4.250%, 6/30/98
- ---------------------------------------------------------------------------------------------------------------------------
Wisconsin -- 2.2%
6,000,000 Wisconsin Health and Educational Facilities Authority, Alexian Village VMIG-1 6,000,000
of Milwaukee, Inc. Refinancing, Series 1988A, Variable Rate Demand Bonds,
3.950%, 3/01/17+
- ---------------------------------------------------------------------------------------------------------------------------
$268,915,000 Total Investments -- 99.4% 268,979,989
============---------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- 0.6% 1,742,848
----------------------------------------------------------------------------------------------------------
Net Assets -- 100% $270,722,837
==========================================================================================================
</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.
10
<PAGE>
<TABLE>
<CAPTION>
Portfolio of Investments
February 28, 1998
California
Principal Amortized
Amount Description Ratings* Cost
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Consumer Staples - 4.4%
$7,000,000 San Dimas Industrial Development Bonds (Bausch & Lomb N/R $7,000,000
Incorporated), Variable Rate Demand Bonds, 3.700%, 12/01/15+
- ----------------------------------------------------------------------------------------------------------------
Health Care - 14.1%
5,100,000 California Health Facilities Financing Authority, Insured VMIG-1 5,100,000
Revenue Bonds (Sutter/CHS), 3.650%, 7/01/22+
1,575,000 California Health Facilities Financing Authority, Refunding VMIG-1 1,575,000
Revenue Bonds (St. Joseph Health System), Series 1985B,
Variable Rate Demand Bonds, 3.650%, 7/01/13+
4,300,000 California Health Facilities Authority (St. Joseph Health VMIG-1 4,300,000
System), Series 1991B, Variable Rate Demand Bonds,
3.650%, 7/01/09+
3,700,000 California Statewide Community Development Authority, Certificates VMIG-1 3,700,000
of Participation (Sutter Health Obligation Group), Variable Rate
Demand Bonds, 3.850%, 7/01/15+
5,000,000 Torrance Hospital Revenue (Little Company of Mary Hospital A-1 5,000,000
- Torrance Memorial Hospital), Variable Rate Demand Bonds,
3.250%, 2/01/22+
3,000,000 Washington Township Hospital District, 1984 Issue A, VMIG-1 3,000,000
Variable Rate Demand Bonds, 3.700%, 1/01/16+
- ----------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 14.7%
2,910,000 Chico Multifamily Housing (Sycamore Glen Project), Series N/R 2,910,000
1995, Variable Rate Demand Bonds, 3.480%, 4/07/14+
3,000,000 Hayward Housing Authority, Multifamily Mortgage Revenue A-2 3,000,000
Refunding, Series 1993A [Huntwood Terrace), Variable Rate
Demand Bonds, 4.000%, 3/01/27+
4,796,000 City of Los Angeles (Studio Colony Project), Variable Rate VMIG-1 4,796,000
Demand Bonds, Multifamily Housing Revenue Bonds,
3.700%, 5/01/07+
7,900,000 Orange County Apartment Development (Monarch Bay Apartments A-1 7,900,000
Project), Variable Rate Demand Bonds, 3.500%, 10/01/07+
3,800,000 Orange County (Robinson Ranch Apartments Project), Variable VMIG-1 3,800,000
Rate Demand Revenue Bonds, 3.200%, 11/01/08+
1,150,000 San Bernardino Multifamily Housing (Castle Park Apartments), VMIG-1 1,150,000
Variable Rate Demand Bonds, 3.750%, 11/01/05+
- ---------------------------------------------------------------------------------------------------------------
Other Revenue - 3.1%
5,000,000 California State Revenue Anticipation Notes, Series 1997, MIG-1 5,010,434
4.500%, 6/30/98
- ---------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 11.9%
5,000,000 California School Cash Reserve Program Authority, 1997 MIG-1 5,014,591
Pool Bonds, Series A, 4.750%, 7/02/98
2,000,000 Irvine Ranch Water District, Variable Rate Demand Bonds, VMIG-1 2,000,000
3.550%, 6/01/15+
2,000,000 Riverside County School Financing Authority, 1997-98 MIG-1 2,009,884
Revenue Anticipation Notes, School Districts
Financing Program, 4.500%, 10/01/98
3,000,000 San Diego County Teeter Obligation, Tax-Exempt Commercial P-1 3,000,000
Paper, Series B, 3.500%, 3/11/98
2,000,000 County of San Mateo, California, 1997-98 Tax and Revenue SP-1+ 2,004,506
Anticipation Notes, 4.500%, 7/01/98
5,000,000 South Coast Local Education Agencies, Pooled Tax and SP-1+ 5,011,169
Revenue Anticipation Notes Program,
Series 1997A, 4.500%, 6/30/98
</TABLE>
11
<PAGE>
Portfolio of Investments
February 28, 1998
California -- continued
<TABLE>
<CAPTION>
Principal Amortized
Amount Description Ratings* Cost
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Tax Obligation/Limited -- 24.9%
$ 9,000,000 Kern Community College District, Certificates of Participation, Series A-2 $ 9,000,000
1995, Variable Rate Demand Bonds, 4.150%, 1/01/25**
5,000,000 Los Angeles County Metro Transport Authority, Second Subordinate Sales A-1 5,000,000
Tax Revenue, Commercial Paper, 3.550%, 5/19/98
1,900,000 Oakland, California, Certificates of Participation, Capital N/R 1,900,000
Improvement Project, Variable Rate Demand Bonds, 3.500%, 12/01/15**
7,000,000 Orange County, Irvine Coast Assessment District #88-1, Variable Rate VMIG-1 7,000,000
Demand Bonds, 3.600%, 9/02/18**
3,000,000 County of Riverside Teeter Obligation, Tax-Exempt Commercial Paper, A-1+ 3,000,000
Series B, 3.700%, 3/12/98
5,000,000 San Joaquin County Transportation Authority, Sales Tax Revenue A-1+ 5,000,000
Commercial Paper, 3.400%, 6/05/98
6,000,000 Santa Clara County Transit District, Refunding Equipment Trust VMIG-1 6,000,000
Certificates, Variable Rate Demand Bonds, 4.050%, 6/01/15**
3,000,000 Westminster Redevelopment Agency, Westminster Commercial Redevelopment A-1+ 3,000,000
Project No. 1, 1997 Tax Allocation Revenue Refunding Bonds,
Variable Rate Demand Bonds (Orange County, California), 3.200%,
8/01/27**
- --------------------------------------------------------------------------------------------------------------------
Utilities -- 7.1%
1,000,000 California Pollution Control Financing Authority, Pacific Gas & A-1+ 1,000,000
Electric, Series 1996D, Commercial Paper, 3.200%, 5/08/98
5,400,000 California Pollution Control Financing Authority, Pollution A-1+ 5,400,000
Control Refunding Revenue Bonds (Pacific Gas and Electric Company),
1996 Series C, Variable Rate Demand Bonds, 3.550%, 11/01/26**
5,000,000 Sacramento Municipal Utility District, Series I, Commercial Paper, A-1+ 5,000,000
3.000%, 3/27/98
- --------------------------------------------------------------------------------------------------------------------
Water and Sewer -- 19.1%
4,675,000 Hillsborough Certificates of Participation, Water & Sewer System Project, A-1 4,675,000
Series 1995A, Variable Rate Demand Bonds, 3.350%, 6/01/15**
2,500,000 Los Angeles Wastewater System, Commercial Paper, 3.150%, 5/20/98 VMIG-1 2,500,000
7,400,000 Monterey County Financing Authority, Revenue Bonds (Reclamation and VMIG-1 7,400,000
Distribution Project), Series 1995A, Variable Rate Demand Bonds,
3.900%, 9/01/36**
6,300,000 Orange County Sanitation District, Certificates of Participation, VMIG-1 6,300,000
Variable Rate Demand Bonds, 3.600%, 8/01/17**
4,050,000 San Diego County, Rincon Del Diablo Municipal Water District, Rincon VMIG-2 4,050,000
Public Facilities Corporation, Commercial Paper, 3.900%, 5/01/98
5,800,000 Santa Paula Public Financing Authority, Lease Revenue Bonds, Series A-2 5,800,000
1996, Water System Acquisition Project, Variable Rate Demand Bonds,
3.800%, 2/01/26**
- --------------------------------------------------------------------------------------------------------------------
$159,256,000 Total Investments -- 99.3% 159,306,584
================----------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- 0.7% 1,188,858
------------------------------------------------------------------------------------------------
Net Assets -- 100% $160,495,442
================================================================================================
* 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.
</TABLE>
12
<PAGE>
Portfolio of Investments
February 28, 1998
Massachusetts
<TABLE>
<CAPTION>
Principal Amortized
Amount Description Ratings* Cost
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Education and Civic Organizations -- 24.7%
$ 800,000 Massachusetts Health and Educational Facilities Authority (Harvard VMIG-1 $ 800,000
University), Variable Rate Demand Bonds, 2.950%, 2/01/16**
1,700,000 Massachusetts Health and Educational Facilities Authority, Amherst College VMIG-1 1,700,000
Issue, Series F, Variable Rate Demand Bonds, 3.100%, 11/01/26**
1,000,000 Massachusetts Industrial Finance Agency (Showa Women's Institute Boston, VMIG-1 1,000,000
Inc. 1994 Project), Variable Rate Demand Bonds, 3.650%, 3/15/04**
1,000,000 Massachusetts Industrial Finance Agency (Emerson College Issue), Series N/R 1,000,000
1995, Variable Rate Demand Bonds, 3.200%, 1/01/15**
1,000,000 Massachusetts Industrial Finance Agency (Massachusetts Society for the A-1 1,000,000
Prevention of Cruelty to Animals Issue), Series 1997, Variable Rate
Demand Bonds, 3.250%, 8/01/27**
1,000,000 Massachusetts Industrial Finance Agency (Gordon College Issue), Series A-1+ 1,000,000
1997, Variable Rate Demand Bonds, 3.250%, 12/01/27**
1,000,000 Massachusetts Industrial Finance Agency (Eastern Nazarene College Issue), A-1+ 1,000,000
Series 1997, Variable Rate Demand Bonds, 3.250%, 10/01/27**
1,800,000 Puerto Rico Industrial Medical, Educational and Environmental Authority VMIG-1 1,800,000
(Inter American University of Puerto Rico), Commercial Paper, 3.650%,
4/06/98
- --------------------------------------------------------------------------------------------------------------------
Health Care -- 21.5%
1,000,000 Massachusetts Health and Educational Facilities Authority, Capital Asset VMIG-1 1,000,000
Program, Series A, Variable Rate Demand Bonds, 3.300%, 1/01/01**
1,000,000 Massachusetts Health and Educational Facilities Authority (Capital Asset VMIG-1 1,000,000
Program, Series B), Variable Rate Demand Bonds, 3.400%, 7/01/05**
1,700,000 Massachusetts Health and Educational Facilities Authority (Capital Asset VMIG-1 1,700,000
Program), Variable Rate Demand Bonds, 3.600%, 1/01/35**
1,800,000 Massachusetts Health and Educational Facilities Authority (Brigham and VMIG-1 1,800,000
Women's Hospital), Variable Rate Demand Bonds, 3.300%, 7/01/17**
1,900,000 Massachusetts Health and Educational Facilities Authority, Partners VMIG-1 1,900,000
Healthcare System, Series P, Variable Rate Demand Bonds, 3.100%,
7/01/27**
675,000 Massachusetts Health and Educational Facilities Authority, Hallmark Health Aaa 675,997
System Issue, Revenue Bonds, Series A, Variable Rate Demand Bonds,
4.250%, 7/01/98
- --------------------------------------------------------------------------------------------------------------------
Housing/Multifamily -- 6.8%
1,560,000 Massachusetts Industrial Finance Agency, Chestnut House Apartments A-2 1,560,000
(FHA Insurance), Variable Rate Demand Bonds, 3.300%, 8/01/26**
1,000,000 Massachusetts Industrial Finance Agency (Lower Mills Associates LP), N/R 1,000,000
Series 1995, Variable Rate Demand Bonds, 3.200%, 12/01/20**
- --------------------------------------------------------------------------------------------------------------------
Industrial/Other -- 1.6%
585,000 Massachusetts Industrial Finance Agency, Adjustable Rate Industrial Revenue N/R 585,000
Bonds (Jencoat/Levy Realty Trust), Variable Rate Demand Bonds, 4.415%,
10/06/99**
- --------------------------------------------------------------------------------------------------------------------
Long Term Care -- 5.3%
1,300,000 Massachusetts Industrial Finance Agency, Revenue Bonds (Goddard House), A-1 1,300,000
Series 1995, Variable Rate Demand Bonds, 3.150%, 11/01/25**
</TABLE>
13
<PAGE>
Portfolio of Investments
February 28, 1998
Massachusetts -- continued
<TABLE>
<CAPTION>
Principal Amortized
Amount Description Ratings* Cost
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Long Term Care -- continued
$ 680,000 Massachusetts Industrial Finance Agency, Edgewood Retirement Community Project, VMIG-1 $ 680,000
Series 1995-C, Variable Rate Demand Bonds, 3.300%, 11/15/25+
- ---------------------------------------------------------------------------------------------------------------------------------
Other Revenue -- 2.7%
1,000,000 Montachusett Regional Transit Authority, Massachusetts, Revenue Anticipation Notes, N/R 1,001,065
4.250%, 6/26/98
- ---------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General -- 27.3%
1,800,000 Massachusetts Bay Transportation Authority, Series C, Commercial Paper, 3.550%, 4/29/98 A-1+ 1,800,000
1,000,000 Town of Barnstable, Massachusetts, Bond Anticipation Notes, 4.250%, 10/23/98 N/R 1,002,489
1,000,000 Farmingham General Obligation, Unlimited Tax Bond Anticipation Note, 4.000%, 2/05/99 N/R 1,003,335
1,000,000 Town of Georgetown, Massachusetts, Bond Anticipation Notes, 4.000%, 6/12/98 N/R 1,000,542
1,500,000 Town of Holliston, Massachusetts, Bond Anticipation Notes, 4.000%, 9/23/98 N/R 1,502,912
1,000,000 Newton Bond Anticipation Notes, 4.000%, 3/25/98 N/R 1,000,127
1,000,000 City of Quincy, Massachusetts, Bond Anticipation Notes, 4.200%, 5/21/98 N/R 1,000,680
1,000,000 Town of Uxbridge, Massachusetts, Bond Anticipation Notes, 4.250%, 7/15/98 N/R 1,001,433
1,000,000 Town of Weston, Massachusetts, Bond Anticipation Notes, 4.000%, 9/30/98 N/R 1,001,694
- ---------------------------------------------------------------------------------------------------------------------------------
Utilities -- 1.6%
600,000 Massachusetts Industrial Finance Agency, Resource Recovery (Ogden Haverhill), VMIG-1 600,000
Variable Rate Demand Bonds, 3.150%, 12/01/06+
- ---------------------------------------------------------------------------------------------------------------------------------
Water and Sewer -- 5.1%
1,000,000 Massachusetts Water Resources Authority, Series 1997, Commercial Paper, 3.600%, 5/13/98 A-1+ 1,000,000
900,000 Massachusetts Water Resources Authority, Series 1994, Commercial Paper, 3.650%, 5/13/98 A-1+ 900,000
- ---------------------------------------------------------------------------------------------------------------------------------
$36,300,000 Total Investments -- 96.6% 36,315,274
===========----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- 3.4% 1,268,024
-----------------------------------------------------------------------------------------------------------------
Net Assets -- 100% $37,583,298
=================================================================================================================
</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>
<TABLE>
<CAPTION>
Portfolio of Investments
February 28, 1998
New York
Principal Amortized
Amount Description Ratings* Cost
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Consumer Cyclical - 8.6%
$1,100,000 New York Environmental Facilities Corporation (General Electric Company), A-1+ $1,100,000
Commercial Paper, 3.550%, 3/09/98
1,000,000 Dutchess County Industrial Development Agency, Industrial Development A-1 1,000,000
Revenue Bonds (Toys "R" US--NYTEX Inc. Facility), Series 1984, Variable
Rate Demand Bonds, 3.475%, 11/01/19+
500,000 Yonkers Industrial Development Agency, Series 1989, Civic Facility Revenue VMIG-1 500,000
Bonds, Variable Rate Demand Bonds, 3.200%, 7/01/19+
- ----------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations - 18.4%
1,300,000 Dormitory Authority of the State of New York, New York Founding Charitable VMIG-1 1,300,000
Corporation, Revenue Bonds, Series 1997, Variable Rate Demand Bonds,
3.300%, 7/01/12+
1,100,000 New York State Housing Finance Agency, Demand Revenue Bonds, Series 1984-A VMIG-1 1,100,000
(Mt. Sinai School of Medicine), Variable Rate Demand Bonds, 3.250%,
11/01/14+
1,100,000 New York City Trust for Cultural Resources (Guggenheim Foundation), Variable VMIG-1 1,100,000
Rate Demand Bonds, 3.650%, 12/01/15+
200,000 New York City Industrial Development Agency, Revenue Bonds, Series 1989, A-1+ 200,000
Audubon Society, Variable Rate Demand Bonds, 3.650%, 12/01/14+
900,000 Puerto Rico Industrial Medical Education and Environmental Authority, A-1 900,000
Ana G. Mendez Educational Foundation (FEAGM Project), Variable Rate Demand
Bonds, 4.100%, 12/01/15+
980,000 Syracuse Industrial Development Agency, Multi-Modal Interchangeable Rate Civic VMIG-1 980,000
Facility, Revenue Bonds (Syracuse University), Variable Rate Demand Bonds,
3.650%, 3/01/23+
- ----------------------------------------------------------------------------------------------------------------------
Financials - 6.6%
1,000,000 City of Albany Industrial Development Agency, Industrial Development Revenue A-1 1,000,000
Bonds (Vulcan Investors 1986-1 Project), Series 1986 A, Variable Rate Demand
Bonds, 4.100%, 7/01/06 (Mandatory put 7/01/98)+
1,000,000 New York City Industrial Development Agency, Refunding Revenue (LaGuardia A-1+ 1,000,000
Associates Project), Variable Rate Demand Bonds, 3.300%, 12/01/15+
- ----------------------------------------------------------------------------------------------------------------------
Health Care - 9.6%
900,000 Dormitory Authority of the State of New York (Sloan Kettering Cancer Center), A-1 900,000
Variable Rate Demand Bonds, 3.300%, 7/01/19+
900,000 New York State Medical Care Facilities Finance Agency (Lenox Hill Hospital), VMIG-1 900,000
Variable Rate Demand Bonds, 3.300%, 11/01/08+
1,100,000 New York State Medical Care Facilities Finance Agency (Children's Hospital
of Buffalo), Variable Rate Demand Bonds, 3.400%, 11/01/05+ VMIG-1 1,100,000
- ----------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 5.5%
1,000,000 New York State Housing Finance Agency (Normandie Court), Variable Rate
Demand Bonds, 3.150%, 5/15/15+ VMIG-1 1,000,000
370,000 New York City Housing Development Corporation (Parkgate Tower), Variable
Rate Demand Bonds, 3.200%, 12/01/07+ A-1+ 370,000
300,000 New York City Housing Development Corporation (Columbus Gardens Project),
Variable Rate Demand Bonds, 3.200%, 2/01/07+ A-1+ 300,000
</TABLE>
15
<PAGE>
Portfolio of Investments
February 28, 1998
New York - continued
<TABLE>
<CAPTION>
Principal Amortized
Amount Description Ratings* Cost
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Industrial/Other - 5.6%
$ 700,000 Guilderland Industrial Development Agency, Series 1993A (Northeastern P-1 $ 700,000
Ind Park PJ), Variable Rate Demand Bonds, 3.550%, 12/01/08+
1,000,000 Nassau County Industrial Development Agency, Manhasset Associates A-1 1,000,000
Project, Series 1984, Variable Rate Demand Bonds, 3.100%, 12/01/99+
- ----------------------------------------------------------------------------------------------------------------------
Long Term Care - 6.3%
1,100,000 New York State Dormitory Authority (St. Francis Center at the Knolls, VMIG-1 1,100,000
Inc.), Variable Rate Demand Bonds, 3.750%, 7/01/23+
800,000 New York State Dormitory Authority, Revenue Bonds, Series 1995 VMIG-1 800,000
(Beverwyck Inc), Variable Rate Demand Bonds, 3.300%, 7/01/25+
- ----------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 19.0%
1,000,000 New York State Environmental Quality, Variable Interest Rate General VMIG-1 1,000,000
Obligation Bonds, Series 1997A, 3.450%, 2/01/17+
1,000,000 Buffalo Revenue Anticipation Notes, 4.400%, 8/05/98 MIG-1 1,002,435
1,000,000 County of Erie, New York, General Obligation Serial Notes, 1997B, N/R 1,004,341
4.500%, 10/29/98
1,000,000 New York City General Obligation Adjustable Rate Bonds, Fiscal 1994, VMIG-1 1,000,000
Series B-4, Variable Rate Demand Bonds, 3.900%, 8/15/21+
500,000 The City of New York, General Obligation Bonds, Fiscal 1995, Series B, VMIG-1 500,000
Variable Rate Demand Bonds, 3.600%, 8/15/22+
1,250,000 Puerto Rico Government Development Bank, Adjustable Refunding Bonds, VMIG-1 1,250,000
Series 1985, Variable Rate Demand Bonds, 2.900%, 12/01/15+
- ----------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 9.4%
1,200,000 New York Local Government Assistance Corp, Series 1995E, Variable Rate VMIG-1 1,200,000
Demand Bonds, 3.150%, 4/01/25+
640,000 New York State Job Development Authority, Series 1984E, Variable Rate VMIG-1 640,000
Demand Bonds, 4.100%, 3/01/99+
1,000,000 Triborough Bridge and Tunnel Authority, Special Obligation, Series 1994, MIG-1 1,000,000
Variable Rate Demand Bonds, 3.150%, 1/01/24+
- ----------------------------------------------------------------------------------------------------------------------
Transportation - 1.3%
400,000 New York State Thruway Authority, General Revenue Bonds, Variable Rate VMIG-1 400,000
Demand Bonds, 3.650%, 1/01/24+
- ----------------------------------------------------------------------------------------------------------------------
Utilities - 3.3%
1,000,000 New York State Energy Research and Development Authority, Pollution P-1 1,000,000
Control Revenue (Central Hudson Gas and Electric Corporation),
Variable Rate Demand Bonds, 3.200%, 11/01/20+
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Principal Amortized
Amount Description Ratings* Cost
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Water and Sewer - 3.3%
$1,000,000 New York City Municipal Water Finance Authority, Series 3, A-1+ $ 1,000,000
Commercial Paper, 3.300%, 3/09/98
- -------------------------------------------------------------------------------------------------------------------
$29,340,000 Total Investments - 96.9%, 29,346,776
===========--------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 3.1% 929,527
--------------------------------------------------------------------------------------------------
Net Assets - 100% $30,276,303
==================================================================================================
</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.
17
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
Statement of Net Assets
February 28, 1998
Reserves California
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Investments in short-term municipal securities, at amortized
cost, which approximates market value (note 1) $268,979,989 $159,306,584
Cash 1,108,739 652,281
Receivables:
Interest 1,507,742 983,936
Investments sold -- --
Other assets 4,293 8,319
- ---------------------------------------------------------------------------------------------
Total assets 271,600,763 160,951,120
- ---------------------------------------------------------------------------------------------
Liabilities
Accrued expenses:
Management fees (note 4) 94,638 45,277
12b-1 fees (note 4) 17,667 34,497
Other 196,852 17,036
Dividends payable 568,769 358,868
- ---------------------------------------------------------------------------------------------
Total liabilities 877,926 455,678
- ---------------------------------------------------------------------------------------------
Net assets applicable to shares outstanding (note 3) $270,722,837 $160,495,442
=============================================================================================
Shares outstanding:
Service Plan series -- 86,915,597
Distribution Plan series -- 54,788,953
Institutional series -- 18,790,892
- ---------------------------------------------------------------------------------------------
Total shares outstanding 270,722,837 160,495,442
=============================================================================================
Net asset value, offering and redemption price per share
(net assets divided by shares outstanding) $ 1.00 $ 1.00
=============================================================================================
</TABLE>
18
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
Massachusetts New York
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Investments in short-term municipal securities, at amortized
cost, which approximates market value (note 1) $36,315,274 $29,346,776
Cash 1,068,064 795,044
Receivables:
Interest 303,309 147,831
Investments sold 100,000 120,364
Other assets 978 499
- --------------------------------------------------------------------------------------------
Total assets 37,787,625 30,410,514
- --------------------------------------------------------------------------------------------
Liabilities
Accrued expenses:
Management fees (note 4) 1,935 3,226
12b-1 fees (note 4) 21,303 2,682
Other 99,353 63,601
Dividends payable 81,736 64,702
- --------------------------------------------------------------------------------------------
Total liabilities 204,327 134,211
- --------------------------------------------------------------------------------------------
Net assets applicable to shares outstanding (note 3) $37,583,298 $30,276,303
============================================================================================
Shares outstanding:
Service Plan series 6,085,454 1,405,519
Distribution Plan series 25,920,217 28,854,117
Institutional series 5,577,627 16,667
- --------------------------------------------------------------------------------------------
Total shares outstanding 37,583,298 30,276,303
============================================================================================
Net asset value, offering and redemption price per share
(net assets divided by shares outstanding) $ 1.00 $ 1.00
============================================================================================
</TABLE>
See accompanying notes to financial statements.
19
<PAGE>
Statement of Operations
Year ended February 28, 1998
<TABLE>
<CAPTION>
Reserves
<S> <C>
- -------------------------------------------------------------------------------
Investment Income
Tax-exempt interest income (note 1) $10,364,736
- -------------------------------------------------------------------------------
Expenses
Management fees (note 4) 1,375,625
12b-1 fees (note 4) 118,178
Shareholders' servicing agent fees and expenses 446,085
Custodian's fees and expenses 55,780
Directors' fees and expenses (note 4) 5,610
Professional fees 23,126
Shareholders' reports - printing and mailing expenses 151,600
Federal and state registration fees 43,261
Other expenses 23,003
- -------------------------------------------------------------------------------
Total expenses before expense reimbursement 2,242,268
Expense reimbursement (note 4) (178,780)
- -------------------------------------------------------------------------------
Net expenses 2,063,488
- -------------------------------------------------------------------------------
Net investment income 8,301,248
Net gain from investment transactions (notes 1 and 2) --
- -------------------------------------------------------------------------------
Net increase in net assets from operations $ 8,301,248
===============================================================================
</TABLE>
See accompanying notes to financial statements.
20
<PAGE>
<TABLE>
<CAPTION>
California
-------------------------------------------------------------
Service Plan Distribution Plan Institutional
series series series Total
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income
Tax-exempt interest income (note 1) $2,866,349 $1,971,285 $869,013 $5,706,647
- ----------------------------------------------------------------------------------------------------------------------
Expenses
Management fees (note 4) 312,991 214,290 94,714 621,995
12b-1 fees (note 4) 78,990 62,307 -- 141,297
Shareholders' servicing agent fees and expenses 4,125 37,513 212 41,850
Custodian's fees and expenses 21,301 14,582 6,448 42,331
Directors' fees and expenses (note 4) 1,654 1,142 502 3,298
Professional fees 6,972 4,809 2,117 13,898
Shareholders' reports - printing and mailing expenses 8,279 16,970 2,778 28,027
Federal and state registration fees 11,026 494 1,592 13,112
Other expenses 5,849 4,052 1,791 11,692
- ----------------------------------------------------------------------------------------------------------------------
Total expenses before expense reimbursement 451,187 356,159 110,154 917,500
Expense reimbursement (note 4) (20,777) (61,479) -- (82,256)
- ----------------------------------------------------------------------------------------------------------------------
Net expenses 430,410 294,680 110,154 835,244
- ----------------------------------------------------------------------------------------------------------------------
Net investment income 2,435,939 1,676,605 758,859 4,871,403
Net gain from investment transactions (notes 1 and 2) -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $2,435,939 $1,676,605 $758,859 $4,871,403
======================================================================================================================
</TABLE>
See accompanying notes to financial statements.
21
<PAGE>
Statement of Operations - continued
Year ended February 28, 1998
<TABLE>
<CAPTION>
Massachusetts
--------------------------------------------------------------
Service Plan Distribution Plan Institutional
series series series Total
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income
Tax-exempt interest income (note 1) $296,695 $ 975,737 $168,303 $1,440,735
- -----------------------------------------------------------------------------------------------------------------------
Expenses
Management fees (note 4) 32,948 108,396 18,769 160,113
12b-1 fees (note 4) 17,119 23,932 -- 41,051
Shareholders' servicing agent fees and expenses 1,191 30,580 704 32,475
Custodian's fees and expenses 10,324 33,914 5,847 50,085
Directors' fees and expenses (note 4) 935 3,070 529 4,534
Professional fees 7,976 26,067 4,456 38,499
Shareholders' reports - printing and mailing expenses 1,155 28,498 142 29,795
Federal and state registration fees 802 776 649 2,227
Other expenses 1,086 3,599 622 5,307
- -----------------------------------------------------------------------------------------------------------------------
Total expenses before expense reimbursement 73,536 258,832 31,718 364,086
Expense reimbursement (note 4) (28,267) (109,750) (5,908) (143,925)
- -----------------------------------------------------------------------------------------------------------------------
Net expenses 45,269 149,082 25,810 220,161
- -----------------------------------------------------------------------------------------------------------------------
Net investment income 251,426 826,655 142,493 1,220,574
Net gain from investment transactions (notes 1 and 2) -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $251,426 $ 826,655 $142,493 $1,220,574
=======================================================================================================================
</TABLE>
See accompanying notes to financial statements.
22
<PAGE>
<TABLE>
<CAPTION>
New York
--------------------------------------------------------------
Service Plan Distribution Plan Institutional
series series series Total
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income
Tax-exempt interest income (note 1) $20,007 $988,441 $608 $1,009,056
- -----------------------------------------------------------------------------------------------------------------------
Expenses
Management fees (note 4) 2,239 108,502 66 110,807
12b-1 fees (note 4) 220 12,367 -- 12,587
Shareholders' servicing agent fees and expenses 1,724 29,224 26 30,974
Custodian's fees and expenses 889 44,368 27 45,284
Directors' fees and expenses (note 4) 11 609 -- 620
Professional fees 287 14,810 10 15,107
Shareholders' reports -- printing and mailing expenses 1,281 27,782 58 29,121
Federal and state registration fees 7 248 -- 255
Other expenses 62 2,814 1 2,877
- -----------------------------------------------------------------------------------------------------------------------
Total expenses before expense reimbursement 6,720 240,724 188 247,632
Expense reimbursement (note 4) (3,642) (91,510) (96) (95,248)
- -----------------------------------------------------------------------------------------------------------------------
Net expenses 3,078 149,214 92 152,384
- -----------------------------------------------------------------------------------------------------------------------
Net investment income 16,929 839,227 516 856,672
Net gain from investment transactions (notes 1 and 2) -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $16,929 $839,227 $516 $ 856,672
=======================================================================================================================
</TABLE>
See accompanying notes to financial statements.
23
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Reserves
-----------------------------
Year ended Year ended
2/28/98 2/28/97
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income $ 8,301,248 $ 8,865,233
Net realized gain (loss) from investment transactions
(notes 1 and 2) -- --
- ---------------------------------------------------------------------------------------
Net increase in net assets from operations 8,301,248 8,865,233
- ---------------------------------------------------------------------------------------
Distributions to Shareholders (note 1) (8,301,248) (8,865,233)
- ---------------------------------------------------------------------------------------
Common Share Transactions
(at constant net asset value of $1 per share) (note 1)
Net proceeds from sale of shares 175,436,062 423,698,103
Net proceeds from shares issued to shareholders
due to reinvestment of distributions 7,880,661 8,439,437
- ---------------------------------------------------------------------------------------
183,316,723 432,137,540
- ---------------------------------------------------------------------------------------
Cost of shares redeemed (216,681,366) (467,712,524)
- ---------------------------------------------------------------------------------------
Net increase (decrease) in net assets from
share transactions (33,364,643) (35,574,984)
Net assets at the beginning of year 304,087,480 339,662,464
- ---------------------------------------------------------------------------------------
Net assets at the end of year $ 270,722,837 $ 304,087,480
=======================================================================================
</TABLE>
See accompanying notes to financial statements.
24
<PAGE>
<TABLE>
<CAPTION>
California
-----------------------------------------------------------------
Year ended 2/28/98
-----------------------------------------------------------------
Service Plan Distribution Plan Institutional
series series series Total
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations
Net investment income $ 2,435,939 $ 1,676,605 $ 758,859 $ 4,871,403
Net realized gain (loss) from investment transactions
(notes 1 and 2) -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 2,435,939 1,676,605 758,859 4,871,403
- ----------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1) (2,435,939) (1,676,605) (758,859) (4,871,403)
- ----------------------------------------------------------------------------------------------------------------------------
Common Share Transactions
(at constant net asset value of $1 per share) (note 1)
Net proceeds from sale of shares 161,050,966 31,802,629 101,301,804 294,155,399
Net proceeds from shares issued to shareholders due to
reinvestment of distributions 2,277,888 1,512,816 18 3,790,722
- ----------------------------------------------------------------------------------------------------------------------------
163,328,854 33,315,445 101,301,822 297,946,121
- ----------------------------------------------------------------------------------------------------------------------------
Cost of shares redeemed (171,719,687) (36,016,099) (115,353,497) (323,089,283)
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from share
transactions (8,390,833) (2,700,654) (14,051,675) (25,143,162)
Net assets at the beginning of year 95,306,430 57,489,607 32,842,567 185,638,604
- ----------------------------------------------------------------------------------------------------------------------------
Net assets at the end of year $ 86,915,597 $ 54,788,953 $ 18,790,892 $ 160,495,442
============================================================================================================================
</TABLE>
See accompanying notes to financial statements.
25
<PAGE>
Statement of Changes in Net Assets -- continued
<TABLE>
<CAPTION>
California
------------------------------------------------------------------
Year ended 2/28/97
------------------------------------------------------------------
Service Plan Distribution Plan Institutional
series series series Total
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations
Net investment income $ 2,063,055 $ 1,895,382 $ 1,473,714 $ 5,432,151
Net realized gain (loss) from investment
transactions (notes 1 and 2) -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 2,063,055 1,895,382 1,473,714 5,432,151
- ----------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1) (2,063,055) (1,895,382) (1,473,714) (5,432,151)
- ----------------------------------------------------------------------------------------------------------------------------
Common Share Transactions
(at constant net asset value of $1 per share) (note 1)
Net proceeds from sale of shares 138,494,313 60,809,468 209,608,538 408,912,319
Net proceeds from shares issued to shareholders
due to reinvestment of distributions 1,919,782 1,593,201 47,282 3,560,265
- ----------------------------------------------------------------------------------------------------------------------------
140,414,095 62,402,669 209,655,820 412,472,584
- ----------------------------------------------------------------------------------------------------------------------------
Cost of shares redeemed (115,829,598) (77,933,155) (211,205,458) (404,968,211)
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from
share transactions 24,584,497 (15,530,486) (1,549,638) 7,504,373
Net assets at the beginning of year 70,721,933 73,020,093 34,392,205 178,134,231
- ----------------------------------------------------------------------------------------------------------------------------
Net assets at the end of year $ 95,306,430 $ 57,489,607 $ 32,842,567 $ 185,638,604
============================================================================================================================
</TABLE>
See accompanying notes to financial statements.
26
<PAGE>
<TABLE>
<CAPTION>
Massachusetts
----------------------------------------------------------------
Year ended 2/28/98
----------------------------------------------------------------
Service Plan Distribution Plan Institutional
series series series Total
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations
Net investment income $ 251,426 $ 826,655 $ 142,493 $ 1,220,574
Net realized gain (loss) from investment
transactions (notes 1 and 2) -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 251,426 826,655 142,493 1,220,574
- ---------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1) (251,426) (826,655) (142,493) (1,220,574)
- ---------------------------------------------------------------------------------------------------------------------------
Common Share Transactions
(at constant net asset value of $1 per share) (note 1)
Net proceeds from sale of shares 11,631,756 20,106,738 11,348,896 43,087,390
Net proceeds from shares issued to shareholders
due to reinvestment of distributions 252,889 812,123 21,738 1,086,750
- ---------------------------------------------------------------------------------------------------------------------------
11,884,645 20,918,861 11,370,634 44,174,140
- ---------------------------------------------------------------------------------------------------------------------------
Cost of shares redeemed (15,763,455) (22,081,518) (9,770,347) (47,615,320)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from
share transactions (3,878,810) (1,162,657) 1,600,287 (3,441,180)
Net assets at the beginning of year 9,964,264 27,082,874 3,977,340 41,024,478
- ---------------------------------------------------------------------------------------------------------------------------
Net assets at the end of year $ 6,085,454 $ 25,920,217 $ 5,577,627 $ 37,583,298
===========================================================================================================================
</TABLE>
27
See accompanying notes to financial statements.
<PAGE>
Statement of Changes in Net Assets -- continued
<TABLE>
<CAPTION>
Massachusetts
----------------------------------------------------------------
Year ended 2/28/97
----------------------------------------------------------------
Service Plan Distribution Plan Institutional
series series series Total
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations
Net investment income $ 829,383 $ 765,855 $ 126,569 $ 1,721,807
Net realized gain (loss) from investment
transactions (notes 1 and 2) (134) (365) (53) (552)
- ----------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 829,249 765,490 126,516 1,721,255
- ----------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1) (829,249) (765,490) (126,516) (1,721,255)
- ----------------------------------------------------------------------------------------------------------------------------
Common Share Transactions
(at constant net asset value of $1 per share) (note 1)
Net proceeds from sale of shares 44,456,256 21,736,601 12,606,653 78,799,510
Net proceeds from shares issued to shareholders
due to reinvestment of distributions 897,029 748,887 37,305 1,683,221
- ----------------------------------------------------------------------------------------------------------------------------
45,353,285 22,485,488 12,643,958 80,482,731
- ----------------------------------------------------------------------------------------------------------------------------
Cost of shares redeemed (73,639,600) (21,681,856) (12,216,797) (107,538,253)
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from
share transactions (28,286,315) 803,632 427,161 (27,055,522)
Net assets at the beginning of year 38,250,579 26,279,242 3,550,179 68,080,000
- ----------------------------------------------------------------------------------------------------------------------------
Net assets at the end of year $ 9,964,264 $ 27,082,874 $ 3,977,340 $ 41,024,478
============================================================================================================================
</TABLE>
28
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
New York
-----------------------------------------------------------------
Year ended 2/28/98
-----------------------------------------------------------------
Service Plan Distribution Plan Institutional
series series series Total
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations
Net investment income $ 16,929 $ 839,227 $ 516 $ 856,672
Net realized gain (loss) from investment
transactions (notes 1 and 2) -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 16,929 839,227 516 856,672
- ----------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1) (16,929) (839,227) (516) (856,672)
- ----------------------------------------------------------------------------------------------------------------------------
Common Share Transactions
(at constant net asset value of $1 per share) (note 1)
Net proceeds from sale of shares 1,014,732 14,585,479 -- 15,600,211
Net proceeds from shares issued to shareholders
due to reinvestment of distributions 13,306 854,990 -- 868,296
- ----------------------------------------------------------------------------------------------------------------------------
1,028,038 15,440,469 -- 16,468,507
- ----------------------------------------------------------------------------------------------------------------------------
Cost of shares redeemed (36,590) (12,701,915) -- (12,738,505)
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from
share transactions 991,448 2,738,554 -- 3,730,002
Net assets at the beginning of year 414,071 26,115,563 16,667 26,546,301
- ----------------------------------------------------------------------------------------------------------------------------
Net assets at the end of year $1,405,519 $ 28,854,117 $16,667 $ 30,276,303
============================================================================================================================
See accompanying notes to financial statements.
</TABLE>
29
<PAGE>
Statement of Changes in Net Assets - continued
<TABLE>
<CAPTION>
New York
-----------------------------------------------------------------
Year ended 2/28/97
-----------------------------------------------------------------
Service Plan Distribution Plan Institutional
series series series Total
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations
Net investment income $ 12,056 $ 819,638 $ 483 $ 832,177
Net realized gain (loss) from investment
transactions (notes 1 and 2) -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 12,056 819,638 483 832,177
- ----------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1) (12,056) (819,638) (483) (832,177)
- ----------------------------------------------------------------------------------------------------------------------------
Common Share Transactions
(at constant net asset value of $1 per share) (note 1)
Net proceeds from sale of shares 57,000 12,254,309 -- 12,311,309
Net proceeds from shares issued to shareholders
due to reinvestment of distributions 11,184 794,185 -- 805,369
- ----------------------------------------------------------------------------------------------------------------------------
68,184 13,048,494 -- 13,116,678
- ----------------------------------------------------------------------------------------------------------------------------
Cost of shares redeemed (208,572) (18,564,379) -- (18,772,951)
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from
share transactions (140,388) (5,515,885) -- (5,656,273)
Net assets at the beginning of year 554,459 31,631,448 16,667 32,202,574
- ----------------------------------------------------------------------------------------------------------------------------
Net assets at the end of year $ 414,071 $ 26,115,563 $16,667 $ 26,546,301
============================================================================================================================
See accompanying notes to financial statements.
</TABLE>
30
<PAGE>
Notes to Financial Statements
February 28, 1998
1. General Information and Significant Accounting Policies
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 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.
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 valued at amortized
cost. On a dollar-weighted basis, the average maturity of all such securities
must be 90 days or less (at February 28, 1998, the dollar-weighted average life
was 42 days for Reserves, 30 days for California, 58 days for Massachusetts and
33 days for New York).
Securities Transactions
Securities transactions are recorded on a trade date basis. Realized gains and
losses from such transactions are determined on the specific identification
method. Securities purchased or sold on a when-issued or delayed delivery basis
may have extended settlement periods. Any 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 the when-issued and delayed delivery purchase commitments. At
February 28, 1998, there were no such outstanding purchase commitments in any of
the 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
Tax-exempt 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. Each Fund
intends to comply with the requirements of the Internal Revenue Code applicable
to regulated investment companies and to distribute all of its tax-exempt net
investment income, including any net realized capital gains from investment
transactions. 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
Funds, to retain such tax exempt status when distributed to the shareholders of
the Funds. All income dividends paid during the fiscal year ended February 28,
1998, have been designated Exempt Interest Dividends. Net realized capital gain
distributions, if any, are subject to federal taxation.
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 Banks 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
31
<PAGE>
Notes to Financial Statements--continued
February 28, 1998
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
The Funds may invest in transactions in certain derivative financial
instruments, including futures, forward, swap and option contracts, and other
financial instruments with similar characteristics. Although the 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 fiscal year ended February 28,
1998.
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 investments in short-term
municipal securities during the fiscal year ended February 28, 1998, were as
follows:
<TABLE>
<CAPTION>
Reserves California Massachusetts New York
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Purchases $655,708,583 $328,756,802 $94,228,093 $42,274,710
Sales and Maturities 688,777,500 354,432,000 97,155,000 38,770,000
==============================================================================
</TABLE>
At February 28, 1998, the cost of investments owned for federal income tax
purposes was the same as the cost for financial reporting purposes for each
Fund.
3. Composition of Net Assets
At February 28, 1998, 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 California Massachusetts New York
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital paid in:
Service Plan series $ -- $ 86,915,597 $ 6,085,454 $ 1,405,519
Distribution Plan series -- 54,788,953 25,920,217 28,854,117
Institutional series -- 18,790,892 5,577,627 16,667
---------------------------------------------------------------------------------------------
Net assets $ 270,722,837 $ 160,495,442 $ 37,583,298 $ 30,276,303
=============================================================================================
Authorized shares 2,000,000,000 2,350,000,000 2,500,000,000 2,500,000,000
=============================================================================================
</TABLE>
4. Management Fee and Other Transactions with Affiliates
Under the Funds' investment management agreement with Nuveen Advisory Corp. (the
"Adviser"), a wholly owned subsidiary of The John Nuveen Company, each Fund pays
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 million .500 of 1% .400 of 1%
For the next $500 million .475 of 1 .375 of 1
For net assets over $1 billion .450 of 1 .350 of 1
========================================================================
</TABLE>
32
<PAGE>
Also, pursuant to a distribution agreement with the Funds, John Nuveen & Co.
Incorporated (the "Distributor"), a wholly owned subsidiary of The John Nuveen
Company, 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
Distribution Plan series and the Service Plan series and the Distributor 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 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.
The management fee 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 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 those of the 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 or its affiliates.
5. Investment Composition
At February 28, 1998, the revenue sources by municipal purpose, expressed as a
percent of total investments, were as follows:
<TABLE>
<CAPTION>
Reserves California Massachusetts New York
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Basic Materials 3% --% --% --%
Capital Goods 3 -- -- --
Consumer Cyclical 3 -- -- 9
Consumer Staples -- 4 -- --
Education and Civic Organizations 6 -- 26 19
Financials -- -- -- 7
Health Care 18 14 22 10
Housing/Multifamily 3 15 7 6
Industrial/Other 7 -- 2 6
Long Term Care 10 -- 6 7
Other Revenue 2 4 2 --
Tax Obligation/General 16 12 28 20
Tax Obligation/Limited 7 25 -- 10
Utilities 18 7 2 3
Water and Sewer 4 19 5 3
--------------------------------------------------------------------------------------
100% 100% 100% 100%
======================================================================================
</TABLE>
At February 28, 1998, certain 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 (92% for Reserves,
92% for California, 77% for Massachusetts and 96% for New York).
For additional information regarding each investment security, refer to the
Portfolio of Investments.
33
<PAGE>
Financial Highlights
Selected data for a share outstanding throughout each period is as follows:
<TABLE>
<CAPTION>
RESERVES Operating performance Less distributions
------------------------ --------------------------
Net
Net realized and Dividends Net Total
asset unrealized from tax- asset return
value Net gain (loss) exempt net Distributions value on net
Year ended beginning investment from investment from capital end of asset
February 28/29, of period income (a) investments income gains period value (b)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1998 $1.00 $.03 $-- $(.03) $-- $1.00 3.02%
1997 1.00 .03 -- (.03) -- 1.00 2.87
1996 1.00 .03 -- (.03) -- 1.00 3.23
1995 1.00 .03 -- (.03) -- 1.00 2.46
1994 1.00 .02 -- (.02) -- 1.00 1.84
1993 1.00 .02 -- (.02) -- 1.00 2.34
1992 (c) 1.00 .02 -- (.02) -- 1.00 1.45
1991 (d) 1.00 .05 -- (.05) -- 1.00 4.57
1990 (d) 1.00 .06 -- (.06) -- 1.00 5.45
1989 (d) 1.00 .06 -- (.06) -- 1.00 5.70
================================================================================================================
</TABLE>
* Annualized.
(a) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory.
(b) Total returns are calculated on net asset value and are not annualized.
(c) For the five months ended February 29.
(d) For the fiscal year ended September 30.
34
<PAGE>
<TABLE>
<CAPTION>
Ratios/Supplemental data
- -------------------------------------------------------------------
Ratio Ratio
of net of net
Ratio of investment Ratio of investment
expenses income to expenses income to
to average average to average average
net assets net assets net assets net assets
Net assets before before after after
end of period reimburse- reimburse- reimburse- reimburse-
(in thousands) ment ment ment (a) ment (a)
- -------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 270,723 .81% 2.96% .75% 3.02%
304,087 .80 2.82 .75 2.87
339,662 .79 3.18 .75 3.22
351,606 .78 2.40 .75 2.43
404,201 .80 1.78 .75 1.83
450,746 .74 2.35 .74 2.35
477,127 .75* 3.48* .75* 3.48*
451,808 .72 4.56 .72 4.56
430,206 .73 5.45 .73 5.45
390,258 .72 5.69 .72 5.69
===================================================================
</TABLE>
35
<PAGE>
Financial Highlights -- continued
Selected data for a share outstanding throughout each period is as follows:
<TABLE>
<CAPTION>
CALIFORNIA** Operating Performance Less distributions
-------------------------------------- --------------------------
Net
Net realized and Dividends Net Total
asset unrealized from tax- asset return
value Net gain (loss) exempt net Distributions value on net
Year ended beginning investment from investment from capital end of asset
February 28/29, of period income (a) investments income gains period value (b)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1998
Service Plan series $1.00 $.03 $-- $(.03) $-- $1.00 3.13%
Distribution Plan series 1.00 .03 -- (.03) -- 1.00 3.13
Institutional series 1.00 .03 -- (.03) -- 1.00 3.22
1997
Service Plan series 1.00 .03 -- (.03) -- 1.00 2.94
Distribution Plan series 1.00 .03 -- (.03) -- 1.00 2.94
Institutional series 1.00 .03 -- (.03) -- 1.00 3.02
1996
Service Plan series 1.00 .03 -- (.03) -- 1.00 3.32
Distribution Plan series 1.00 .03 -- (.03) -- 1.00 3.31
Institutional series 1.00 .03 -- (.03) -- 1.00 3.40
1995
Service Plan series 1.00 .03 -- (.03) -- 1.00 2.59
Distribution Plan series 1.00 .03 -- (.03) -- 1.00 2.60
Institutional series 1.00 .03 -- (.03) -- 1.00 2.69
1994
Service Plan series 1.00 .02 -- (.02) -- 1.00 1.94
Distribution Plan series 1.00 .02 -- (.02) -- 1.00 1.92
Institutional series 1.00 .02 -- (.02) -- 1.00 2.07
1993
Service Plan series 1.00 .02 -- (.02) -- 1.00 2.28
Distribution Plan series 1.00 .02 -- (.02) -- 1.00 2.29
Institutional series 1.00 .02 -- (.02) -- 1.00 2.36
1992(c)
Service Plan series 1.00 .02 -- (.02) -- 1.00 2.39
Distribution Plan series 1.00 .02 -- (.02) -- 1.00 2.39
Institutional series 1.00 .03 -- (.03) -- 1.00 2.45
1991(d)
Service Plan series 1.00 .05 -- (.05) -- 1.00 4.70
Distribution Plan series 1.00 .05 -- (.05) -- 1.00 4.70
Institutional series 1.00 .05 -- (.05) -- 1.00 4.80
1990 (e) 1.00 .05 -- (.05) -- 1.00 5.37
1989 (e) 1.00 .06 -- (.06) -- 1.00 5.62
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Effective for the fiscal year ended June 30, 1991, and
thereafter, the Fund has presented the per share data by series.
(a) After waiver of certain management fees or reimbursement of
expenses, if applicable, by Nuveen Advisory.
(b) Total returns are calculated on net asset value and are not
annualized.
(c) For the eight months ended February 29.
(d) For the fiscal year ended June 30.
(e) For the fiscal year ended June 30, represents combined per share data
and ratios for the Service Plan, Distribution Plan and Institutional
Series.
36
<PAGE>
<TABLE>
<CAPTION>
Ratios/Supplemental data
- --------------------------------------------------------------------------
Ratio of net Ratio
Ratio of investment Ratio of of net
expenses income to expenses investment
to average average to average income to
net assets net assets net assets average net
Net assets before before after assets after
end of period reimburse- reimburse- reimburse- reimburse-
(in thousands) ment ment ment (a) ment (a)
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 86,916 .58% 3.09% .55% 3.12%
54,789 .66 3.02 .55 3.13
18,791 .47 3.22 .47 3.22
95,306 .59 2.89 .55 2.93
57,490 .61 2.87 .55 2.93
32,843 .46 3.01 .46 3.01
70,722 .56 3.28 .54 3.30
73,020 .62 3.23 .55 3.30
34,392 .46 3.39 .46 3.39
41,772 .59 2.15 .55 2.19
67,157 .64 2.47 .55 2.56
50,772 .47 2.74 .47 2.74
415,238 .53 1.94 .53 1.94
72,380 .73 1.74 .55 1.92
32,299 .41 2.06 .41 2.06
469,812 .57 2.24 .55 2.26
80,652 .62 2.19 .55 2.26
24,156 .47 2.33 .47 2.33
478,886 .56* 3.53* .55* 3.54*
91,670 .61* 3.48* .55* 3.54*
18,334 .45* 3.64* .45* 3.64*
431,590 .57 4.65 .55 4.67
90,031 .61 4.61 .55 4.67
22,342 .45 4.77 .45 4.77
452,465 .59 5.34 .55 5.38
362,927 .57 5.68 .55 5.70
==========================================================================
</TABLE>
37
<PAGE>
Financial Highlights -- continued
Selected data for a share outstanding throughout each period is as follows:
<TABLE>
<CAPTION>
MASSACHUSETTS** Operating Performance Less distributions
---------------------------- ----------------------------
Net
Net realized and Dividends Net Total
asset unrealized from tax- asset return
value Net gain (loss) exempt net Distributions value on net
Year ended beginning investment from investment from capital end of asset
February 28/29, of period income (a) investments income gains period value (b)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1998
Service Plan series $1.00 $.03 $-- $(.03) $-- $1.00 3.05%
Distribution Plan series 1.00 .03 -- (.03) -- 1.00 3.05
Institutional series 1.00 .03 -- (.03) -- 1.00 3.05
1997
Service Plan series 1.00 .03 -- (.03) -- 1.00 2.84
Distribution Plan series 1.00 .03 -- (.03) -- 1.00 2.84
Institutional series 1.00 .03 -- (.03) -- 1.00 2.84
1996
Service Plan series 1.00 .03 -- (.03) -- 1.00 3.17
Distribution Plan series 1.00 .03 -- (.03) -- 1.00 3.17
Institutional series 1.00 .03 -- (.03) -- 1.00 3.18
1995
Service Plan series 1.00 .03 -- (.03) -- 1.00 2.53
Distribution Plan series 1.00 .03 -- (.03) -- 1.00 2.53
Institutional series 1.00 .03 -- (.03) -- 1.00 2.61
1994
Service Plan series 1.00 .02 -- (.02) -- 1.00 1.77
Distribution Plan series 1.00 .02 -- (.02) -- 1.00 1.74
Institutional series 1.00 .02 -- (.02) -- 1.00 1.80
1993
Service Plan series 1.00 .02 -- (.02) -- 1.00 2.33
Distribution Plan series 1.00 .02 -- (.02) -- 1.00 2.33
Institutional series 1.00 .02 -- (.02) -- 1.00 2.34
1992 (c)
Service Plan series 1.00 .03 -- (.03) -- 1.00 3.22
Distribution Plan series 1.00 .03 -- (.03) -- 1.00 3.22
Institutional series 1.00 .03 -- (.03) -- 1.00 3.24
1991 (d)
Service Plan series 1.00 .05 -- (.05) -- 1.00 5.30
Distribution Plan series 1.00 .05 -- (.05) -- 1.00 5.30
Institutional series 1.00 .05 -- (.05) -- 1.00 5.30
1990 (e) 1.00 .06 -- (.06) -- 1.00 5.70
1989 (e) 1.00 .05 -- (.05) -- 1.00 5.00
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Effective for the fiscal year ended June 30, 1991, and
thereafter, the Fund has presented the per share data by series.
(a) After waiver of certain management fees or reimbursement of
expenses, if applicable, by Nuveen Advisory.
(b) Total returns are calculated on net asset value and are not
annualized.
(c) For the ten months ended February 29.
(d) For the fiscal year ended April 30.
(e) For the fiscal year ended April 30, represents combined per
share data and ratios for the Service Plan, Distribution Plan and
Institutional Series.
38
<PAGE>
<TABLE>
<CAPTION>
Ratios/Supplemental data
- ------------------------------------------------------------------------------------------
Ratio of net Ratio
Ratio of investment Ratio of of net
expenses income to expenses investment
to average average to average income to
net assets net assets net assets average net
Net assets before before after assets after
end of period reimburse- reimburse- reimburse- reimburse-
(in thousands) ment ment ment (a) ment (a)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 6,085 .89% 2.71% .55% 3.05%
25,920 .95 2.65 .55 3.05
5,578 .68 2.91 .55 3.04
9,964 .74 2.64 .55 2.83
27,083 .90 2.49 .55 2.84
3,977 .61 2.78 .55 2.84
38,251 .63 3.06 .55 3.14
26,279 .84 2.87 .55 3.16
3,550 .57 3.12 .54 3.15
27,732 .61 2.49 .55 2.55
24,237 .82 2.28 .55 2.55
1,036 .47 2.63 .47 2.63
38,576 .55 1.88 .52 1.91
27,773 .76 1.67 .55 1.88
3,406 .49 1.93 .49 1.93
40,214 .73 2.16 .55 2.34
27,993 .82 2.07 .55 2.34
5,325 .58 2.31 .55 2.34
61,476 .62* 3.73* .55* 3.80*
34,509 .72* 3.63* .55* 3.80*
8,917 .53* 3.82* .53* 3.82*
37,979 .68 5.12 .55 5.25
33,809 .76 5.04 .55 5.25
14,973 .54 5.26 .54 5.26
53,631 .74 5.48 .55 5.67
31,319 .76 4.97 .55 5.18
==========================================================================================
</TABLE>
39
<PAGE>
Financial Highlights -- continued
Selected data for a share outstanding throughout each period is as
follows:
<TABLE>
<CAPTION>
NEW YORK** Operating performance Less distributions
------------------------ ----------------------------
Net
Net realized and Dividends Net Total
asset unrealized from tax- asset return
value Net gain (loss) exempt net Distributions value on net
Year ended beginning investment from investment from capital end of asset
February 28/29, of period income (a) investments income gains period value(b)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1998
Service Plan series $1.00 $.03 $-- $(.03) $-- $1.00 3.10%
Distribution Plan series 1.00 .03 -- (.03) -- 1.00 3.10
Institutional series 1.00 .03 -- (.03) -- 1.00 3.10
1997
Service Plan series 1.00 .03 -- (.03) -- 1.00 2.90
Distribution Plan series 1.00 .03 -- (.03) -- 1.00 2.90
Institutional series 1.00 .03 -- (.03) -- 1.00 2.90
1996
Service Plan series 1.00 .03 -- (.03) -- 1.00 3.20
Distribution Plan series 1.00 .03 -- (.03) -- 1.00 3.20
Institutional series 1.00 .03 -- (.03) -- 1.00 3.20
1995
Service Plan series 1.00 .02 -- (.02) -- 1.00 2.36
Distribution Plan series 1.00 .02 -- (.02) -- 1.00 2.37
Institutional series 1.00 .02 -- (.02) -- 1.00 2.28
1994
Service Plan series 1.00 .02 -- (.02) -- 1.00 1.51
Distribution Plan series 1.00 .02 -- (.02) -- 1.00 1.51
Institutional series 1.00 .02 -- (.02) -- 1.00 1.51
1993
Service Plan series 1.00 .02 -- (.02) -- 1.00 2.02
Distribution Plan series 1.00 .02 -- (.02) -- 1.00 2.02
Institutional series 1.00 .02 -- (.02) -- 1.00 2.02
1992 (c)
Service Plan series 1.00 .03 -- (.03) -- 1.00 2.94
Distribution Plan series 1.00 .03 -- (.03) -- 1.00 2.94
Institutional series 1.00 .03 -- (.03) -- 1.00 2.97
1991 (d)
Service Plan series 1.00 .05 -- (.05) -- 1.00 4.73
Distribution Plan series 1.00 .05 -- (.05) -- 1.00 4.73
Institutional series 1.00 .05 -- (.05) -- 1.00 4.73
1990 (e) 1.00 .05 -- (.05) -- 1.00 5.36
1989 (e) 1.00 .05 -- (.05) -- 1.00 4.95
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Effective for the fiscal year ended April 30, 1991, and
thereafter, the Fund has presented the per share data by series.
(a) After waiver of certain management fees or reimbursement of
expenses, if applicable, by Nuveen Advisory.
(b) Total returns are calculated on net asset value and are not
annualized.
(c) For the ten months ended February 29.
(d) For the fiscal year ended April 30.
(e) For the fiscal year ended April 30, represents combined per
share data and ratios for the Service Plan, Distribution Plan
and Institutional Series.
40
<PAGE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
- --------------------------------------------------------------------------------
Ratio of net Ratio
Ratio of investment Ratio of of net
expenses income to expenses investment
to average average to average income to
net assets net assets net assets average net
Net assets before before after assets after
end of period reimburse- reimburse- reimburse- reimburse-
(in thousands) ment ment ment(a) ment(a)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 1,406 1.20% 2.38% .55% 3.03%
28,854 .89 2.75 .55 3.09
17 1.13 2.52 .55 3.10
414 1.27 2.17 .55 2.89
26,116 .92 2.52 .55 2.89
17 1.12 2.33 .55 2.90
554 1.92 1.82 .55 3.19
31,631 .94 2.80 .55 3.19
17 1.38 2.37 .55 3.20
640 .95 1.98 .55 2.38
29,798 .79 2.14 .55 2.38
17 2.14 .79 .55 2.38
557 1.49 .69 .55 1.63
27,886 .78 1.40 .55 1.63
17 4.60 (2.42) .55 1.63
529 1.17 1.42 .55 2.04
34,827 .78 1.81 .55 2.04
17 19.33 (16.59) .55 2.19
1,934 .87* 3.19* .55* 3.51*
45,259 .71* 3.35* .55* 3.51*
17 11.89* (7.83)* .55* 3.51*
1,653 .88 4.39 .55 4.72
41,446 .69 4.58 .55 4.72
17 .62 4.65 .55 4.72
41,602 .71 5.18 .55 5.34
30,262 .86 4.74 .55 5.05
================================================================================
</TABLE>
41
<PAGE>
Report of Independent Public Accountants
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 28, 1998, 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 Fund's 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 28, 1998, by correspondence with the
custodian. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
net assets of each of the respective funds constituting the Nuveen
Tax-Free Reserves, Inc., Nuveen California Tax-Free Fund, Inc. and
Nuveen Tax-Free Money Market Fund, Inc. as of February 28, 1998,
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 15, 1998
42
<PAGE>
43
<PAGE>
Building Better Portfolios with Nuveen
Reducing the impact of taxes and moderating risk are important
goals for many risk-sensitive investors seeking to build better
portfolios. For these investors, a tax-efficient, risk-resistant
investment portfolio often forms the foundation of a carefully
crafted financial plan for building and sustaining wealth. Nuveen
is committed to providing investors and their financial advisers
with a range of products and investment tools to help build better
portfolios.
Mutual Funds
Nuveen Mutual Funds offer investors access to the Nuveen family of
premier advisers, including Nuveen Advisory Corp., Institutional
Capital Corp. and Rittenhouse Financial Services. Our equity,
balanced and income funds seek to provide consistent performance,
time-tested strategies to reduce risk and experienced,
professional management.
Private Asset Management
Rittenhouse Financial Services and Nuveen Asset Management offer
comprehensive, customized investment management solutions to
investors with assets of $250,000 or more. A range of actively
managed growth, balanced and municipal income-oriented portfolios
are available, all based upon a disciplined investment philosophy.
Unit Trusts
Nuveen Unit Trusts are fixed portfolios of quality securities that
are a convenient, attractive alternative to purchasing individual
securities. They provide low-cost diversification to reduce risk,
experienced, professional security selection and surveillance, and
daily liquidity at that day's net asset value for quick access to
your assets.
Exchange-Traded Funds
Nuveen Exchange-Traded Funds offer investors actively managed
portfolios of investment-grade quality municipal bonds. The fund
shares are listed and traded on the New York and American stock
exchanges. Exchange-traded funds provide the investment
convenience, price visibility and liquidity of common stocks.
MuniPreferred/R/
Nuveen MuniPreferred offers investors a AAA-rated investment with
an attractive tax-free yield for the cash reserves portion of an
investment portfolio. MuniPreferred shares are backed 2-to-1 by
the long-term portfolios of Nuveen dual-class exchange-traded
funds and are available for national as well as a wide variety of
state-specific portfolios.
Nuveen Family of Mutual Funds
Nuveen offers a variety of funds designed to help you reach
your financial goals.
Growth
Nuveen Rittenhouse Growth Fund
Growth and Income
Growth and Income Stock Fund
Balanced Stock and Bond Fund
Balanced Municipal and Stock Fund
Tax-Free Income
National Funds
Long-Term Insured Intermediate-Term Limited Term
State Funds
Alabama
Arizona
California
Colorado
Connecticut
Florida
Georgia
Kansas
Kentucky
Louisiana
Maryland
Massachusetts
Michigan
Missouri
New Jersey
New Mexico
New York
North Carolina
Ohio
Pennsylvania
South Carolina
Tennessee
Virginia
Wisconsin
44
<PAGE>
Fund Information
Board of Directors Custodian
Robert P. Bremner The Chase Manhattan Bank
Lawrence H. Brown 4 New York Plaza
Anthony T. Dean New York, NY 10004-2413
Anne E. Impellizzeri (800) 257-8787
Peter R. Sawers
William J. Schneider Transfer Agent,
Timothy R. Schwertfeger
Judith M. Stockdale Shareholder Services and
Fund Manager Dividend Disbursing Agent
Nuveen Advisory Corp. Shareholder Services, Inc.
333 West Wacker Drive Nuveen Investor Services
Chicago, IL 60606 P.O. Box 5330
Denver, CO 80217-5330
(800) 621-7227
Legal Counsel
Fried, Frank, Harris,
Shriver & Jacobson
Washington, D.C.
Public Accountants
Arthur Andersen LLP
Chicago, IL
45
<PAGE>
[PHOTO OF JOHN NUVEEN, SR. APPEARS HERE]
John Nuveen, Sr.
Serving Investors for Generations
Since our founding in 1898, John Nuveen & Co. has been synonymous with
investments that withstand the test of time. Today, we offer a broad range of
investments designed for risk-sensitive individuals seeking to build and sustain
wealth. In fact, more than 1.3 million investors have trusted Nuveen to help
them maintain the lifestyle they currently enjoy.
The cornerstone of Nuveen's investment philosophy is a commitment to disciplined
long-term investment strategies focused on providing consistent, attractive
performance over time - with moderated risk. We emphasize quality securities
carefully chosen through in-depth research, and we follow those securities
closely over time to ensure that they continue to meet our exacting standards.
Whether your focus is long-term growth, dependable current income or sustaining
accumulated wealth, Nuveen offers a wide variety of products and services to
help meet your unique circumstances and financial planning needs. Our equity,
balanced, and income funds, along with our unit trusts and private asset
management, can form the foundation of a tax-efficient and risk-resistant
portfolio.
Talk with your financial adviser to learn more about how Nuveen investment
products and services can help you build and sustain your long-term financial
security. Or call us at (800) 621-7227 for more information, including a
prospectus where applicable. Please read that information carefully before you
invest.
NUVEEN
OUR SECOND CENTURY 1898/1998
helping investors sustain the wealth of a lifetime.(TM)
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
www.nuveen.com
<PAGE>
PART C--OTHER INFORMATION
NUVEEN TAX-FREE RESERVES, INC.
333 West Wacker Drive
Chicago, Illinois 60606
<PAGE>
PART C--OTHER INFORMATION
ITEM 24: FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements:
Financial information included in the Prospectus:
Financial Highlights
Included in the Statement of Additional Information through incorporation
by reference to the Registrant's Annual Report:
Portfolio of Investments, February 28, 1998
Statement of Net Assets, February 28, 1998
Statement of Operations, Year Ended February 28, 1998
Statements of Changes in Net Assets, Years Ended February 28, 1998 and
February 28, 1997
Report of Independent Public Accountants, dated April 15, 1998
(b) Exhibits
<TABLE>
<C> <S>
1. Articles of Incorporation of Registrant, as amended and as
currently in effect. Filed as Exhibit 1 to Registrant's
Registration Statement on Form N-1A (File No. 2-78736) and
incorporated herein by reference thereto.
2. By-Laws of Registrant as currently in effect. Filed as Exhibit 2
to Registrant's Registration Statement on Form N-1A (File No. 2-
78736) and incorporated herein by reference thereto.
3. Not applicable.
4. Specimen certificate of shares of Capital Stock of Registrant.
Filed as Exhibit 4 to Post-Effective Amendment No. 16 to the
Registrant's Registration Statement on Form N-1A (File No. 2-
78736) and is incorporated herein by reference thereto.
5(a). Investment Management Agreement between Registrant and Nuveen
Advisory Corp. dated May 1, 1988. Filed as Exhibit 5(a) to Post-
Effective Amendment No. 14 to the Registrant's Registration
Statement on Form N-1A (File No. 2-78736) and incorporated herein
by reference thereto.
5(b). Renewal, dated May 5, 1998, of Investment Management Agreement.
6(a). Distribution Agreement between Registrant and John Nuveen & Co.
Incorporated, dated August 2, 1982. Filed as Exhibit 6 to
Registrant's Registration Statement on Form N-1A (File No. 2-
78736) and incorporated herein by reference thereto.
6(b). Renewal, dated July 31, 1997, of Distribution Agreement.
7. Not applicable.
</TABLE>
C-1
<PAGE>
<TABLE>
<C> <S>
8(a). Custody Agreement, dated October 1, 1993, between Registrant and
United States Trust Company of New York. Filed as Exhibit 8 to
Post-Effective Amendment No. 13 to Registrant's Registration
Statement on Form N-1A (File No. 2-78736) and incorporated herein
by reference thereto.
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, and is incorporated herein by reference
thereto.
9. Transfer Agency Agreement between Registrant and Shareholder
Services, Inc. dated July 1, 1997.
10. Opinion of Morgan, Lewis & Bockius LLP.
11. Consent of Independent Public Accountants.
12. Not applicable.
13. Not applicable.
14. Not applicable.
15. Distribution and Service Plan and related form of Service Agreement
under the Registrant's 12b-1 Plan. Filed as Exhibit 15 to
Registrant's Registration Statement on Form N-1A (File No. 2-78736)
and incorporated herein by reference thereto.
16. Schedule of Computation of Yield Figures.
17. Financial Data Schedule.
18. Not applicable.
99(a). Agreement for a Money Market Fund Insurance Program. Filed as
Exhibit 18 to Post-Effective Amendment No. 8 to Registrant's
Registration Statement on Form N-1A (File No. 2-78736) and
incorporated herein by reference thereto.
99(b). Certified copy of resolution of Board of Directors authorizing the
signing of the names of officers and directors on the Registration
Statement pursuant to power of attorney.
99(c). Original Power of Attorney for Judith M. Stockdale authorizing,
among others, Gifford R. Zimmerman and Larry W. Martin to execute
the Registration Statement on her behalf as one of the Registrant's
Directors. Original Powers of Attorney for all of Registrant's
other Directors authorizing, among others, Gifford R. Zimmerman and
Larry W. Martin to execute the Registration Statement were filed as
Exhibit 99(c) to Post-Effective Amendment No. 16 to Registrant's
Registration Statement on Form N-1A (File No. 2-78736) and is
incorporated herein by reference thereto.
99(d). Code of Ethics and Reporting Requirements. Filed as Exhibit 99(d)
to Post-Effective Amendment No. 14 to the Registrant's Registration
Statement on Form N-1A (File No. 2-78736) and incorporated herein
by reference thereto.
</TABLE>
C-2
<PAGE>
ITEM 25: PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not applicable.
ITEM 26: NUMBER OF HOLDERS OF SECURITIES
As of May 19, 1998:
<TABLE>
<CAPTION>
TITLE OF CLASS NUMBER OF RECORD HOLDERS
-------------- ------------------------
<S> <C>
Common Stock ($.01 par value).................... 13,536
</TABLE>
ITEM 27: INDEMNIFICATION
Section 2-418 of the General Corporation Law of Maryland provides for Indemni-
fication of officers and directors. Article NINTH of the Articles of Incorpora-
tion of Registrant provides as follows:
NINTH: To the maximum extent permitted by the General Corporation Law of
the State of Maryland, as from time to time amended, the Corporation shall
indemnify its currently acting and its former directors, officers, employ-
ees and agents, and those persons who, at the request of the Corporation
serve or have served another corporation, partnership, joint venture, trust
or other enterprise in one or more such capacities. The indemnification
provided for herein shall not be deemed exclusive of any other rights to
which those seeking indemnification may otherwise be entitled.
Expenses (including attorneys' fees) incurred in defending a civil or crim-
inal action, suit or proceeding (including costs connected with the prepa-
ration of a settlement) may be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding, if authorized by the
Board of Directors in the specific case, upon receipt of an undertaking by
or on behalf of the director, officer, employee or agent to repay that
amount of the advance which exceeds the amount which it is ultimately de-
termined that he is entitled to receive from the Corporation by reason of
indemnification as authorized herein; provided, however, that prior to mak-
ing any such advance at least one of the following conditions shall have
been met: (1) the indemnitee shall provide a security for his undertaking,
(2) the Corporation shall be insured against losses arising by reason of
any lawful advances, or (3) a majority of a quorum of the disinterested,
non-party directors of the Corporation, or an independent legal counsel in
a written opinion, shall determine, based on a review of readily available
facts, that there is reason to believe that the indemnitee ultimately will
be found and entitled to indemnification.
Nothing in these Articles of Incorporation or in the By-Laws shall be
deemed to protect or provide indemnification to any director or officer of
the Corporation against any liability to the Corporation or to its security
holders to which he would otherwise be subject by reason of willful misfea-
sance, bad faith, gross negligence or reckless disregard of the duties in-
volved in the conduct of his office ("disabling conduct"), and the Corpora-
tion shall not indemnify any of its officers or directors against any lia-
bility to the Corporation or to its security holders unless a determination
shall have been made in the manner provided hereafter that such liability
has not arisen from such officer's or director's disabling conduct. A de-
termination that an officer or director is entitled to indemnification
shall have been properly made if it is based upon (1) a final decision on
the merits
C-3
<PAGE>
by a court or other body before whom the proceeding was brought that the
person to be indemnified ("indemnitee") was not liable by reason of dis-
abling conduct or, (2) in the absence of such a decision, a reasonable de-
termination, based upon a review of the facts, that the indemnitee was not
liable by reason of disabling conduct, by (a) the vote of a majority of a
quorum of directors who are neither "interested persons" of the Corporation
as defined in the Investment Company Act of 1940 nor parties to the pro-
ceeding, or (b) an independent legal counsel in a written opinion.
-----------------
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to the officers, directors or controlling persons of the
Registrant pursuant to the Articles of Incorporation of the Registrant or oth-
erwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as ex-
pressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by an officer or director or control-
ling person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such officer, director or controlling persons in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling pre-
cedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
The directors and officers of the Registrant (and of the other management in-
vestment companies for which Nuveen Advisory serves as investment adviser) are
covered by an Investment Trust Errors and Omissions policy in the aggregate
amount of $20,000,000 (with a maximum deductible of $500,000) against liabil-
ity and expenses of claims of wrongful acts arising out of their position with
the Registrant (and such other companies), except for matters which involve
willful acts, bad faith, gross negligence and willful disregard of duty (i.e.,
where the insured did not act in good faith for a purpose he or she reasonably
believed to be in the best interest of the applicable investment company or
where he or she had reasonable cause to believe this conduct was unlawful).
ITEM 28: BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Nuveen Advisory Corp. serves as investment adviser to the following open-end
management type investment companies: Nuveen Flagship Multistate Trust I,
Nuveen Flagship Multistate Trust II, Nuveen Flagship Multistate Trust III,
Nuveen Flagship Multistate Trust IV, Nuveen Flagship Municipal Trust, Flagship
Admiral Funds Inc., Nuveen California Tax-Free Fund, Inc., Nuveen Tax-Free
Money Market Fund, Inc., Nuveen Tax-Exempt Money Market Fund, Inc., and Nuveen
Tax-Free Reserves, Inc. It also serves as investment adviser to the following
closed-end management investment companies: Nuveen Municipal Value Fund, Inc.,
Nuveen California Municipal Value Fund, Inc., Nuveen New York Municipal Value
Fund, Inc., Nuveen Municipal Income Fund, Inc., Nuveen Premium Income Munici-
pal Fund, Inc., Nuveen Performance Plus Municipal Fund, Inc., Nuveen Califor-
nia Performance Plus Municipal Fund, Inc., Nuveen New York Performance Plus
Municipal Fund, Inc., Nuveen Municipal Advantage Fund, Inc., Nuveen Municipal
Market Opportunity Fund, Inc., Nuveen California Municipal Market Opportunity
Fund, Inc., Nuveen Investment Quality Municipal Fund, Inc., Nuveen California
Investment Quality Municipal Fund, Inc., Nuveen New York Investment Quality
Municipal Fund, Inc., Nuveen Insured Quality Municipal Fund, Inc., Nuveen
Florida
C-4
<PAGE>
Investment Quality Municipal Fund, Nuveen New Jersey Investment Quality Munic-
ipal Fund, Inc., Nuveen Pennsylvania Investment Quality Municipal Fund, Nuveen
Select Quality Municipal Fund, Inc., Nuveen California Select Quality Munici-
pal Fund, Inc., Nuveen New York Select Quality Municipal Fund, Inc., Nuveen
Quality Income Municipal Fund, Inc., Nuveen Insured Municipal Opportunity
Fund, Inc., Nuveen Florida Quality Income Municipal Fund, Nuveen Michigan
Quality Income Municipal Fund, Inc., Nuveen Ohio Quality Income Municipal
Fund, Inc., Nuveen Texas Quality Income Municipal Fund, Nuveen California
Quality Income Municipal Fund, Inc., Nuveen New York Quality Income Municipal
Fund, Inc., Nuveen Premier Municipal Income Fund, Inc., Nuveen Premier Insured
Municipal Income Fund, Inc., Nuveen Premium Income Municipal Fund 2, Inc.,
Nuveen Insured California Premium Income Municipal Fund, Inc., Nuveen Insured
New York Premium Income Municipal Fund, Inc., Nuveen Select Maturities Munici-
pal Fund, Nuveen Arizona Premium Income Municipal Fund, Inc., Nuveen Insured
Florida Premium Income Municipal Fund, Nuveen Michigan Premium Income Munici-
pal Fund, Inc., Nuveen New Jersey Premium Income Municipal Fund, Inc., Nuveen
Premium Income Municipal Fund 4, Inc., Nuveen Insured California Premium In-
come Municipal Fund 2, Inc., Nuveen Pennsylvania Premium Income Municipal Fund
2, Nuveen Maryland Premium Income Municipal Fund, Nuveen Massachusetts Premium
Income Municipal Fund, Nuveen Virginia Premium Income Municipal Fund, Nuveen
Washington Premium Income Municipal Fund, Nuveen Connecticut Premium Income
Municipal Fund, Nuveen Georgia Premium Income Municipal Fund, Nuveen Missouri
Premium Income Municipal Fund, Nuveen North Carolina Premium Income Municipal
Fund, Nuveen California Premium Income Municipal Fund and Nuveen Insured Pre-
mium Income Municipal Fund 2. Nuveen Advisory Corp. has no other clients or
business at the present time. The principal business address for all of these
investment companies is 333 West Wacker Drive, Chicago, Illinois 60606.
For a description of other business, profession, vocation or employment of a
substantial nature in which any director or officer, other than Timothy R.
Schwertfeger and Anthony T. Dean, of the investment adviser has engaged during
the last two years for his account or in the capacity of director, officer,
employee, partner or trustee, see the descriptions under "Management" in the
Statement of Additional Information.
Timothy R. Schwertfeger is Chairman and Director of Nuveen Advisory Corp., the
investment adviser. Mr. Schwertfeger has, during the last two years, been
Chairman and formerly Executive Vice President and Director of The John Nuveen
Company, John Nuveen & Co. Incorporated, and Nuveen Institutional Advisory
Corp.; Chairman and Director (since January 1997) of Nuveen Asset Management,
Inc.; Director (since 1996) of Institutional Capital Corporation. Anthony T.
Dean is President and Director of Nuveen Advisory Corp., the investment advis-
er. Mr. Dean has, during the last two years, been Executive Vice President and
Director of The John Nuveen Company and John Nuveen & Co. Incorporated; and
Director of Nuveen Institutional Advisory Corp.; President and Director (since
January 1997) of Nuveen Asset Management, Inc.; Chairman and Director of Rit-
tenhouse Financial Services, Inc.
ITEM 29: PRINCIPAL UNDERWRITERS
(a) John Nuveen & Co. Incorporated ("Nuveen") acts as principal underwriter to
the following open-end management type investment companies: Nuveen Flagship
Multistate Trust I, Nuveen Flagship
C-5
<PAGE>
Multistate Trust II, Nuveen Flagship Multistate Trust III, Nuveen Flagship
Multistate Trust IV, Nuveen Flagship Municipal Trust, Nuveen California Tax-
Free Fund, Inc., Nuveen Tax-Free Money Market Fund, Inc., Nuveen Tax-Exempt
Money Market Fund, Inc., Nuveen Tax-Free Reserves, Inc., Flagship Admiral
Funds Inc., Nuveen Investment Trust, and Nuveen Investment Trust II. Nuveen
also acts as depositor and principal underwriter of the Nuveen Tax-Exempt Unit
Trust and Nuveen Unit Trusts, registered unit investment trusts. Nuveen has
also served as a co-managing underwriter of the shares of Nuveen Municipal
Value Fund, Inc., Nuveen California Municipal Value Fund, Inc., Nuveen New
York Municipal Value Fund, Inc., Nuveen Municipal Income Fund, Inc., Nuveen
Premium Income Municipal Fund, Inc., Nuveen Performance Plus Municipal Fund,
Inc., Nuveen California Performance Plus Municipal Fund, Inc., Nuveen New York
Performance Plus Municipal Fund, Inc., Nuveen Municipal Advantage Fund, Inc.,
Nuveen Municipal Market Opportunity Fund, Inc., Nuveen California Municipal
Market Opportunity Fund, Inc., Nuveen Investment Quality Municipal Fund, Inc.,
Nuveen California Investment Quality Municipal Fund, Inc., Nuveen New York In-
vestment Quality Municipal Fund, Inc., Nuveen Insured Quality Municipal Fund,
Inc., Nuveen Florida Investment Quality Municipal Fund, Nuveen New Jersey In-
vestment Quality Municipal Fund, Inc., Nuveen Pennsylvania Investment Quality
Municipal Fund, Nuveen Select Quality Municipal Fund, Inc., Nuveen California
Select Quality Municipal Fund, Inc., Nuveen New York Select Quality Municipal
Fund, Inc., Nuveen Quality Income Municipal Fund, Inc., Nuveen Insured Munici-
pal Opportunity Fund, Inc., Nuveen Florida Quality Income Municipal Fund,
Nuveen Michigan Quality Income Municipal Fund, Inc., Nuveen Ohio Quality In-
come Municipal Fund, Inc., Nuveen Texas Quality Income Municipal Fund, Nuveen
California Quality Income Municipal Fund, Inc., Nuveen New York Quality Income
Municipal Fund, Inc., Nuveen Premier Municipal Income Fund, Inc., Nuveen Pre-
mier Insured Municipal Income Fund, Inc., Nuveen Select Tax-Free Income Port-
folio, Nuveen Premium Income Municipal Fund 2, Inc., Nuveen Insured California
Premium Income Municipal Fund, Inc., Nuveen Insured New York Premium Income
Municipal Fund, Inc., Nuveen Select Maturities Municipal Fund, Nuveen Arizona
Premium Income Municipal Fund, Inc., Nuveen Insured Florida Premium Income Mu-
nicipal Fund, Nuveen Michigan Premium Income Municipal Fund, Inc., Nuveen New
Jersey Premium Income Municipal Fund, Inc., Nuveen Premium Income Municipal
Fund 4, Inc., Nuveen Insured California Premium Income Municipal Fund 2, Inc.,
Nuveen Pennsylvania Premium Income Municipal Fund 2, Nuveen Maryland Premium
Income Municipal Fund, Nuveen Massachusetts Premium Income Municipal Fund,
Nuveen Virginia Premium Income Municipal Fund, Nuveen Washington Premium In-
come Municipal Fund, Nuveen Connecticut Premium Income Municipal Fund, Nuveen
Georgia Premium Income Municipal Fund, Nuveen Missouri Premium Income Munici-
pal Fund, Nuveen North Carolina Premium Income Municipal Fund, Nuveen Califor-
nia Premium Income Municipal Fund, Nuveen Insured Premium Income Municipal
Fund 2, Nuveen Select Tax-Free Income Portfolio 2, Nuveen Insured California
Select Tax-Free Income Portfolio, Nuveen Insured New York Select Tax-Free In-
come Portfolio and Nuveen Select Tax-Free Income Portfolio 3.
(b)
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER WITH REGISTRANT
- ----------------------------------------------------------------------------------
<S> <C> <C>
Timothy R. Schwertfeger Chairman of the Board, Chairman of the Board
333 West Wacker Drive Chief Executive Officer and Director
Chicago, IL 60606 and Director
</TABLE>
C-6
<PAGE>
<TABLE>
<S> <C> <C>
Anthony T. President and Director President and Director
Dean
333 West
Wacker Drive
Chicago, IL
60606
John P. Executive Vice President None
Amboian and Chief Financial Officer
333 West
Wacker Drive
Chicago, IL
60606
Bruce P. Executive Vice President Executive Vice President
Bedford
333 West
Wacker Drive
Chicago, IL
60606
Alan G. Vice President and Secretary Vice President and Assistant Secretary
Berkshire
333 West
Wacker Drive
Chicago, IL
60606
William Vice President None
Adams IV
333 West
Wacker Drive
Chicago, IL
60606
Clifton L. Vice President None
Fenton
333 West
Wacker Drive
Chicago, IL
60606
Kathleen M. Vice President Vice President
Flanagan
333 West
Wacker Drive
Chicago, IL
60606
Stephen D. Vice President Vice President and Controller
Foy
333 West
Wacker Drive
Chicago, IL
60606
Robert D. Vice President None
Freeland
333 West
Wacker Drive
Chicago, IL
60606
Michael G. Vice President None
Gaffney
333 West
Wacker Drive
Chicago, IL
60606
Anna R. Vice President Vice President
Kucinskis
333 West
Wacker Drive
Chicago, IL
60606
Robert B. Vice President None
Kuppenheimer
333 West
Wacker Drive
Chicago, IL
60606
</TABLE>
C-7
<PAGE>
<TABLE>
<S> <C> <C>
Larry W. Martin Vice President and Vice President and
333 West Wacker Drive Assistant Secretary Assistant Secretary
Chicago, IL 60606
Thomas C. Muntz Vice President None
333 West Wacker Drive
Chicago, IL 60606
Stuart W. Rogers Vice President None
333 West Wacker Drive
Chicago, IL 60606
Bradford W. Shaw, Jr. Vice President None
333 West Wacker Drive
Chicago, IL 60606
H. William Stabenow Vice President and Vice President and
333 West Wacker Drive Treasurer Treasurer
Chicago, IL 60606
Paul C. Williams Vice President None
333 West Wacker Drive
Chicago, IL 60606
Gifford R. Zimmerman Vice President and Vice President and
333 West Wacker Drive Assistant Secretary Secretary
Chicago, IL 60606
</TABLE>
ITEM 30: LOCATION OF ACCOUNT AND RECORDS
Nuveen Advisory Corp., 333 West Wacker Drive, Chicago, Illinois 60606, main-
tains Articles of Incorporation, By-Laws, minutes of directors and shareholder
meetings, contracts and all advisory material of the investment adviser.
The Chase Manhattan Bank, 4 New York Plaza, New York, New York 10004, main-
tains all general and subsidiary ledgers, journals, trial balances, records of
all portfolio purchases and sales, and all other required records not main-
tained by Nuveen Advisory Corp., Shareholder Services, Inc., or Chase Global
Funds Services Company.
Until August 10, 1998, Shareholder Services, Inc., P.O. Box 5330, Denver, Col-
orado 80217-5330 will maintain all the required records in its capacity as
transfer, dividend paying, and shareholder service agent for the Registrant.
After August 10, 1998, Chase Global Funds Services Company, P.O. Box 5186,
New York, New York 10274-5186, will maintain the same records in the same ca-
pacity for the Registrant.
ITEM 31: MANAGEMENT SERVICES
Not applicable.
ITEM 32: UNDERTAKINGS
Not applicable.
C-8
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933 AND THE INVESTMENT
COMPANY ACT OF 1940 THE REGISTRANT CERTIFIES THAT THIS REGISTRATION STATEMENT
MEETS ALL THE REQUIREMENTS FOR EFFECTIVENESS UNDER PARAGRAPH (B) OF RULE 485
UNDER THE SECURITIES ACT OF 1933 AND HAS DULY CAUSED THIS REGISTRATION STATE-
MENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED,
IN THIS CITY OF CHICAGO, AND STATE OF ILLINOIS, ON THE 15TH DAY OF JUNE, 1998.
NUVEEN TAX-FREE RESERVES, INC.
/s/ Gifford R. Zimmerman
--------------------------------------
Gifford R. Zimmerman, Vice President
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE CAPACITIES AND
ON THE DATE INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Stephen D. Foy
- -------------------------------
Stephen D. Foy Vice President and June 15, 1998
Controller (Principal
Financial and
Accounting Officer)
Timothy R. Schwertfeger Chairman of the Board )
and Director (Principal )
Executive Officer) )
)
Anthony T. Dean President and Director )
)
Robert P. Bremner Director )
)
Lawrence H. Brown Director ) By /s/ Gifford R. Zimmerman
) --------------------------
Anne E. Impellizzeri Director ) Gifford R. Zimmerman
) Attorney-in-Fact
Peter R. Sawers Director )
) June 15, 1998
William J. Schneider Director )
)
Judith M. Stockdale Director )
</TABLE>
AN ORIGINAL POWER OF ATTORNEY AUTHORIZING, AMONG OTHERS, GIFFORD R. ZIMMERMAN
AND LARRY W. MARTIN TO EXECUTE THIS REGISTRATION STATEMENT, AND AMENDMENTS
THERETO, FOR JUDITH M. STOCKDALE, HAS BEEN EXECUTED AND IS FILED AS AN EXHIBIT
TO THIS REGISTRATION STATEMENT. AN ORIGINAL POWER OF ATTORNEY FOR EACH OF THE
OTHER OFFICERS AND DIRECTORS OF THE REGISTRANT HAS BEEN EXECUTED AND IS INCOR-
PORATED BY REFERENCE IN THIS REGISTRATION STATEMENT.
C-9
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBIT PAGE
------- ------- ------------
<C> <S> <C>
Renewal, dated May 5, 1998, of Investment Management
5(b). Agreement.
Renewal, dated July 31, 1997, of Distribution
6(b). Agreement.
9. Transfer Agency Agreement dated July 1, 1997.
10. Opinion of Morgan, Lewis & Bockius LLP.
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.
99(c). Original Power of Attorney for Judith M. Stockdale
authorizing, among others, Gifford R. Zimmerman and
Larry W. Martin to execute the Registration Statement
on her behalf as one of the Registrant's Directors.
</TABLE>
<PAGE>
EXHIBIT 5(b)
NUVEEN TAX-FREE RESERVES, INC.
RENEWAL OF INVESTMENT MANAGEMENT AGREEMENT
------------------------------------------
This Agreement made this 5th day of May, 1998 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, 1998 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, 1999 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, 1999 and ratify and confirm the Agreement in all respects.
NUVEEN TAX-FREE RESERVES, INC.
By: /s/ Gifford R. Zimmerman
------------------------------
Vice President
ATTEST:
/s/ Karen L. Healy
- -----------------------------
Assistant Secretary
NUVEEN ADVISORY CORP.
By: /s/ Edward F. Neild
------------------------------
Vice President
ATTEST:
/s/ Larry W. Martin
- -----------------------------
Assistant Secretary
<PAGE>
EXHIBIT 6(b)
Renewal of Distribution Agreement
---------------------------------
This Agreement made this 31st day of July, 1997 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, 1997 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, 1998 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, 1998 and ratify and confirm the Agreement in all respects.
NUVEEN TAX-FREE RESERVES, INC.
By: /s/ Gifford R. Zimmerman
------------------------------
Vice President
ATTEST:
/s/ Karen L. Healy
- -----------------------------
Assistant Secretary
JOHN NUVEEN & CO. INCORPORATED
By: /s/ Anna R. Kucinskis
------------------------------
Vice President
ATTEST:
/s/ Larry Martin
- -----------------------------
Assistant Secretary
<PAGE>
EXHIBIT 9
NUVEEN TAX-FREE RESERVES, INC.
TRANSFER AGENCY AGREEMENT
This agreement is made as of the 1st day of July, 1997, between NUVEEN TAX-
FREE RESERVES, INC., a Maryland corporation having its principal office and
place of business at 333 West Wacker Drive, Chicago, Illinois 60606
(hereinafter referred to as the "Fund"), and SHAREHOLDER SERVICES, INC., a
Colorado corporation having its place of business at 6803 South Tucson Way,
Englewood, Colorado 80112 (hereinafter referred to as the "Transfer Agent").
In consideration of the mutual promises hereinafter set forth, the parties
hereto covenant and agree as follows:
ARTICLE 1
DEFINITIONS
Whenever used in this Agreement, the following words and phrases shall have
the following meanings:
1.1 "Approved Institution" shall mean a broker-dealer, broker, bank or
other entity named in a Certificate, as hereinafter defined, and having
account(s) in the Fund or the Distributor or an agent it appoints, in each case
acting on behalf of the Fund for the benefit of its clients. From time to time
the Fund may amend a previously delivered Certificate by delivering to the
Transfer Agent a Certificate naming an additional entity as an Approved
Institution or deleting any entity named as an Approved Institution in a
previously delivered Certificate.
1.2 "Business Day" shall mean each day on which the New York Stock
Exchange is open for trading.
1.3 "Certificate" shall mean any notice, instruction, or other instrument
in writing, authorized or required by this Agreement to be given to the Transfer
Agent by the Fund and which is signed by any Officer, as hereinafter defined,
and actually received by the Transfer Agent. "Certificate" shall also include
any notice submitted to the Transfer Agent by electronic or telephone
transmission, reasonably believed by the Transfer Agent to be genuine and to
have been properly made, signed or authorized by an Officer.
1.4 "Computer Tape" shall mean any computer/electromagnetic tape or
transmission transmitted by an Approved Institution, via a remote terminal or
other similar link, into a data processing, storage, or collection system or
similar system (the "System"), located on the Transfer Agent's premises. For
purposes of Section 5.1, such Computer Tape shall be deemed to have been
furnished at such times as are agreed upon from time to time by the Transfer
Agent and Fund only if the information reflected thereon was input into the
system at such times as are agreed upon from time to time by the Transfer Agent
and the Fund.
1.5 "Custodian" shall mean, with respect to the Fund, Chase Manhattan Bank
of New York as custodian under the terms and conditions of the Custody Agreement
between the Custodian and the
Page 1
<PAGE>
Fund, or in any case any successor(s) to such Custodian performing similar
functions for or on behalf of the Fund.
1.6 "Direct Accounts" means accounts registered in the name(s) of
shareholders other than Approved Institutions.
1.7 "Distributor" shall mean John Nuveen & Co. Incorporated (hereinafter
referred to as "Nuveen & Co."), as distributor under the terms and conditions of
the Distributor's Contract between the Fund and Nuveen & Co., wherein Nuveen &
Co. has the exclusive right to sell shares of the Fund to investors against
orders therefor at net asset value, or any successor(s) to Nuveen & Co.
performing a similar function for or on behalf of the Fund.
1.8 "Effective Date" shall mean July 1, 1997 or the date the Fund begins
operations.
1.9 "Series" shall mean each individual portfolio of the Fund, if any,
each being a separate portfolio of securities and other assets, interests in
which are represented by a separate series of the Fund's shares, and such terms
shall include any other such portfolio that may be created for which the
Transfer Agent agrees to act as transfer agent pursuant to Article 10 of this
Agreement.
1.10 "Officer" shall mean the Fund's Chairman of the Board, President, any
Vice President, Secretary, any Assistant Secretary, Treasurer, any Assistant
Treasurer and any other person duly authorized by the Board of Directors of the
Fund to execute or give any Certificate on behalf of the Fund and named in the
Certificate annexed hereto as Appendix A, as such Certificate may be amended
from time to time.
1.11 "Prospectus" shall mean the most current Fund prospectus and statement
of additional information relating to the Shares, actually received by the
Transfer Agent from the Fund and shall include to the extent applicable, shares
designated as comprising any and all classes of any series of the Fund.
1.12 "Shares" shall mean full or fractional shares comprising all or any
part of each series representing the beneficial interest in the Fund and shall
include to the extent applicable, shares designated as comprising any and all
classes of any series of the Fund.
ARTICLE 2
APPOINTMENT OF TRANSFER AGENT
2.1 The Fund hereby constitutes and appoints the Transfer Agent as
transfer agent of all the Shares of the Fund and as dividend disbursing agent
for the Fund during the term of this Agreement.
2.2 The Transfer Agent hereby accepts appointment as transfer agent and
dividend disbursing agent and agrees to perform the duties hereinafter set
forth.
Page 2
<PAGE>
2.3. In connection with such appointment, upon or prior to executing this
Agreement, the Fund shall deliver to the Transfer Agent such of the following as
have not already been furnished to the Transfer Agent:
(a) A copy of the Articles of Incorporation of the Fund and all amendments
thereto certified by the Secretary of the Fund;
(b) A copy of the By-Laws of the Fund certified by the Secretary of the
Fund;
(c) A copy of resolutions of the Board of Directors of the Fund, certified
by the Secretary of the Fund, authorizing the execution of this Transfer Agency
Agreement;
(d) A Certificate signed by the Secretary of the Fund specifying the names
and specimen signatures of the Officers of the Fund;
(e) Specimen Share certificates for Shares of each series of the Fund in
the form approved by the Board of Directors of the Fund, together with a
certificate signed by the Secretary of the Fund as to such approval;
(f) Copies of the most recently filed Post-Effective Amendment to the
Fund's Registration Statement, filed with the Securities and Exchange Commission
under the Securities Act of 1933, as amended, and under the Investment Company
Act of 1940, as amended, together with any applications for exemptive relief
from any of the provisions of such laws filed by the Fund and the record of any
formal action of the Securities and Exchange Commission with respect to all such
applications; and
(g) Opinion of Counsel for the Fund to the effect that (1) beneficial
interest in each Fund is divided into an unlimited number of shares of
beneficial interest, (2) the issue and sale of the Fund's authorized but
unissued Shares have been duly authorized under Maryland law, (3) the
outstanding Shares are fully paid and non-assessable and (4) upon the issue and
sale of any authorized and unissued Shares and upon receipt of the authorized
consideration therefor in an amount not less than either the Shares' net asset
value or par value, if any, established and in force at the time of their sale,
the Fund Shares so issued will be validly issued, fully paid and non-assessable.
2.4. The Fund shall either (a) furnish the Transfer Agent with sufficient
supplies of blank share certificates in the form approved from time to time by
the Board of Directors of the Fund, and from time to time will renew such
supplies upon request of the Transfer Agent, or (b) authorize the Transfer Agent
to itself create laser-printed Share certificates in the form approved by the
Board of Directors of the Fund. Any such blank Share certificates shall be
properly signed, by facsimile or otherwise, by authorized Officers and, if
required, shall bear the seal of the Fund or a facsimile thereof.
Notwithstanding the death, resignation or removal of any Officer authorized to
sign such Share certificates, the Transfer Agent may continue to countersign and
issue Share certificates bearing such Officer's signature until otherwise
directed by the Fund. The Fund agrees to indemnify and exonerate, save and hold
the Transfer Agent harmless, from and against any and all claims or demands that
may be asserted against the Transfer Agent with respect to the genuineness of
any Share certificate supplied to the Transfer Agent by the Fund pursuant to
this Agreement.
Page 3
<PAGE>
ARTICLE 3
AUTHORIZATION AND ISSUANCE OF SHARES
3.1. The Transfer Agent shall maintain records of accounts evidencing
ownership of Shares as provided in this Agreement and in the Fund's Prospectus
and, subject to the terms and conditions of this Agreement, when requested shall
countersign, record, issue, and deliver certificates for Shares both upon
original issue and transfer. Evidence of the ownership of Shares shall be
maintained on the Transfer Agent's records in book (uncertificated) form, or, if
requested by an Approved Institution (or the Distributor or its agent acting on
behalf of such Approved Institution) or shareholder, share certificates shall be
issued, subject to the provisions of Article 5 hereof, to evidence the ownership
of Shares.
3.2. Prior to the issuance of any Shares pursuant to Share splits and prior
to any reduction in the number of Shares outstanding, the Fund shall deliver the
following documents to the Transfer Agent:
(a) A copy of the resolution(s) adopted by the Board of Directors of the
Fund and/or the shareholders of the relevant Fund, certified by the Secretary of
the Fund, authorizing such issuance of additional Shares of such Fund or such
reduction, as the case may be;
(b) In the case of the issuance of Shares, an opinion of counsel for the
Fund with respect to matters set forth in Section 2.3(g) hereof as to such
shares; and
(c) Such additional documents as the Transfer Agent may reasonably
request.
ARTICLE 4
RECAPITALIZATION OR CAPITAL ADJUSTMENT
4.1. In the case of any Share split, recapitalization or other capital
adjustment, the Transfer Agent will, in the case of accounts represented by
uncertificated Shares, cause the account records to be adjusted, as necessary,
to reflect the number of Shares held for the account of each such shareholder as
a result of such adjustment, or, in the case of Shares represented by
certificates, will, if so instructed by the Fund, issue revised Share
certificates in exchange for, or upon transfer of, outstanding Share
certificates in the old form, in either case upon receiving:
(a) A Certificate authorizing the issuance of revised Share certificates
and any other action required to be taken by the Transfer Agent in connection
with any such split, recapitalization or other capital adjustment;
(b) A copy of any amendment to the Articles of Incorporation of the Fund,
certified by the Secretary of the Fund, with respect to the adjustment;
(c) Specimen Share certificates in the revised form approved by the Board
of Directors of the Fund;
Page 4
<PAGE>
(d) An opinion of counsel for the Fund with respect to the matters set
forth in Article 2, Section 2.3(g) hereof as to such Shares; and
(e) Such additional documents as the Transfer Agent may reasonably
request.
4.2. The Fund shall either (a) furnish the Transfer Agent with a
sufficient supply of blank Share certificates in any new form authorized in
connection with any such Share split, recapitalization or other capital
adjustment, and from time to time will replenish such supply upon the request of
the Transfer Agent, or (b) authorize the Transfer Agent to itself create laser-
printed Share certificates in the form approved by the Board of Directors of the
Fund. Any such blank Share certificates shall be properly signed by authorized
Officers and, if required, shall bear the Fund's seal or facsimile thereof.
ARTICLE 5
ISSUANCE, REDEMPTION, AND TRANSFER OF SHARES
5.1. (a) On each Business Day, the Transfer Agent shall accept, at such
time as are agreed upon from time to time by the Transfer Agent and the Fund,
(i) purchase orders received by the Transfer Agent directly from an Approved
Institution (or the Distributor or its agent acting on behalf of such Approved
Institution) or an individual investor, (ii) redemption requests either received
from a shareholder, whether or not an Approved Institution (or the Distributor
or its agent acting on behalf of such Approved Institution), or contained in a
Certificate, and (iii) requests for exchanges of the Fund's Shares of a given
class for Shares of another fund received from a shareholder, whether or not an
Approved Institution (or the Distributor or its agent acting on behalf of such
Approved Institution), or contained in a Certificate, provided that (1) such
purchase order, exchange request or redemption request, as the case may be, is
in conformity with the Fund's purchase, exchange, and redemption procedures, as
applicable, described in the Prospectus, and (2) if such type of purchase order,
exchange request, or redemption request is not described in the Prospectus in
effect upon the commencement date of the Agreement, the Transfer Agent has
agreed to accept and act as to such order or request. Upon receipt on any
Business Day of any check drawn or endorsed to the Transfer Agent, the Fund or
the Distributor for the purchase of Shares, or any payment made by Automated
Clearing House or Federal Funds wire, the Transfer Agent shall deposit such
check or payment in the bank account established by the Fund or the Distributor
for the collection of such amounts and shall wire such amounts to the Fund's
Custodian on the next Business Day. The Transfer Agent shall have no
responsibility hereunder for the Fund's compliance with states securities
registration laws ("Blue Sky laws") relating to such purchase orders, except to
the extent that the Transfer Agent will maintain records in a manner that will
enable the Fund to monitor the total number of Shares of the Fund sold in each
state and shall provide the Fund reports as to such sales as specified in
Appendix B to this Agreement.
(b) On each Business Day, the Transfer Agent shall also accept, at
such times as are agreed upon from time to time by the Transfer Agent and the
Fund, a Computer Tape consistent in all respects with the Transfer Agent's tape
layout package, as amended from time to time, which is believed by the Transfer
Agent to be furnished by or on behalf of any Approved Institution, setting forth
data as to purchases, redemptions and exchanges of Shares irrespective of
whether payment of the purchase price accompanies such computer tape. The
Transfer Agent may rely on the data on such Computer Tapes as
Page 5
<PAGE>
accurate, and shall not be responsible hereunder for errors in such Computer
Tapes furnished to it hereunder, unless caused by the Transfer Agent's own
negligence, bad faith or willful misconduct.
(c) On each Business Day, the Fund shall provide or cause to be
provided to the Transfer Agent, at such time as the parties hereto shall agree,
the net asset value per share for the Fund and such other information as the
Transfer Agent may reasonably request.
5.2. On the Business Day following each Business Day, at such time as the
Transfer Agent and the Fund shall agree, an authorized employee of the Transfer
Agent shall confirm the following information by summary sheet transmitted by
electronic or other electromagnetic means to an authorized employee or agent of
the Fund (or by such other form as shall be agreed upon from time to time by the
Fund and the Transfer Agent):
(a) The total dollar amount to be applied toward the purchase of
Shares of the Fund and the number of Shares of the Fund purchased on such prior
Business Day, computed by aggregating the amounts so specified in (i) the
purchase orders received by the Transfer Agent on such prior Business Day from
individual investors and (ii) all Computer Tapes described in Section 5.1(b)
timely received by the Transfer Agent with respect to such prior Business Day;
(b) The total dollar value and number of Shares of the Fund redeemed
on such prior Business Day, computed by aggregating the amounts so specified in
(i) the redemption requests received by the Transfer Agent directly on the
preceding Business Day from shareholders, and (ii) all Computer Tapes described
in Section 5.1(b) relating to such prior Business Day; and
(c) The total dollar value and number of Shares of the Fund to be
exchanged for Shares of another fund and the number of Shares of such other fund
to be issued in such exchanges on such prior Business Day, and the total dollar
value and number of shares of the Fund to be issued in exchange for shares of
another fund on such prior business day (if not included in 5.2(a) above)
computed by aggregating the amounts represented by any exchange requests
received directly by the Transfer Agent from shareholders and the amounts
specified in all Computer Tapes described in Section 5.1(b) relating to such
prior Business Day.
5.3. Following each Business Day, the Transfer Agent will (on a day on
which banks in Denver, Colorado, Chicago, Illinois and New York, New York are
open for business but in any event on or prior to the Fifth Business Day
following such Business Day) advise the Distributor of the amount of cash
necessary to be wired to the Custodian, representing purchase orders for
appropriate Fund's Shares received by the Transfer Agent as to such Business
Day, as set forth in Section 5.1 above. As to each Business Day, the Transfer
Agent will advise the Fund of the amount of cash representing exchange orders
received by the Transfer Agent as to such Business Day, such advice to be given
on the next Business Day.
5.4. As to each Business Day, the Transfer Agent shall issue to, and redeem
from, the accounts specified in a purchase order, redemption request, or
exchange request received by the Transfer Agent in proper form in accordance
with the Prospectus and, when required by the Prospectus, properly endorsed by
the record owner thereof with the record owner's or owners' signature(s)
guaranteed by a U.S. commercial bank or U.S. trust company, a member of a
national securities exchange, a foreign
Page 6
<PAGE>
bank with a U.S. correspondent bank or a federally-chartered savings and loan
association, or shall issue to, and/or redeem from, the accounts specified in a
Computer Tape received by the Transfer Agent from an Approved Institution, the
appropriate number of full and fractional Shares based on the net asset value
per Share of the relevant series of the relevant Funds specified in an advice
received as to such Business Day from the Fund. Notwithstanding the foregoing,
if a redemption specified in a redemption request received directly by the
Transfer Agent or in a Computer Tape is for a dollar value of Shares in excess
of the dollar value of uncertificated Shares in the specified account plus the
dollar value of certificated Shares in the specified account for which the
Transfer Agent has received the tender of a Share certificate or certificates in
proper form as described above, the Transfer Agent shall not effect such
redemption in whole or part. In such case involving a Computer Tape, the
Transfer Agent shall orally or by electronic or other electromagnetic means
advise both the Fund and the Approved Institution (or the Distributor or its
agent if acting on behalf of such Approved Institution) which supplied such
Computer Tape of such discrepancy. In such case involving a direct shareholder,
the Transfer Agent shall, within five (5) business days, notify such shareholder
directly, orally or in writing.
5.5. The Transfer Agent shall, as of each Business Day specified in a
Certificate described in Section 6.1, issue Shares of the Fund, based on the net
asset value per Share of the Fund specified in an advice received from the Fund
to such Business Day, in connection with a reinvestment of a dividend or
distribution on Shares of the Fund.
5.6. On each Business Day, the Transfer Agent shall advise the Fund by
computer/electromagnetic tape specifying, with respect to the immediately
preceding Business Day: the total number of Shares of the Fund (including
fractional Shares) issued and outstanding at the opening of business on such
day; the total number of Shares of the Fund sold on such day, pursuant to
Section 5.2; the total number of Shares of the Fund redeemed or exchanged on
such day; the total number of Shares of the Fund, if any, sold on such day
pursuant to preceding Section 5.4, and the total number of Shares of the Fund
issued and outstanding at the close of business on such day. Unless the Fund or
its agent shall advise the Transfer Agent of any error in the information
contained in such computer/electromagnetic tape (the "Initial Tape") prior to
the transmission of the next computer/electromagnetic tape by the Transfer
Agent, the Transfer Agent shall be deemed to have fulfilled its responsibilities
hereunder with respect to the accuracy of the data on subsequent
computer/electromagnetic tapes submitted to the Fund that are based, in whole or
in part upon any inaccurate data from the Initial Tape.
5.7. In connection with each purchase, exchange and redemption of Shares
other than pursuant to a Computer Tape submitted by an Approved Institution (or
by the Distributor or its agent acting on behalf of such Approved Institution),
the Transfer Agent shall send to the shareholder such statements as are
described in the Prospectus or as otherwise reasonably instructed in writing by
the Funds. If the Prospectus indicates that certificates for Shares are
available, and if specifically requested in writing by any shareholder, or if
otherwise required hereunder, the Transfer Agent will countersign, issue and
mail to such shareholder, at the address set forth in the records of the
Transfer Agent, a Share certificate for any full Shares requested.
5.8. In computing the redemption proceeds to be paid to any shareholder or
to an account for an Approved Institution, the Transfer Agent shall first
compute the amount of any withholding for federal income taxes for which the
Transfer Agent has the responsibility under this Agreement to calculate such
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withholding, in such manner as the Fund and the Transfer Agent shall agree from
time to time in conformity with instructions provided by the Fund to the
Transfer Agent. The Transfer Agent shall also compute any withholding for
federal income taxes for which the Transfer Agent has such responsibility at the
time of any exchange of a Fund's shares for another fund's shares. In the case
of a redemption of Shares directly by a shareholder of record and not by means
of a Computer Tape submitted by an Approved Institution (or by the Distributor
or its agent acting on behalf of such Approved Institution), upon deposit of
moneys in a redemption account by the relevant Custodian against which the
Transfer Agent is authorized by the Fund to draw checks in connection with a
redemption of Shares of the Fund, the Transfer Agent shall cancel the redeemed
Shares and after making appropriate deduction for any withholding of taxes
required of it by this Agreement or applicable law, make payment of (i) the
redemption proceeds to the order of the shareholder, and (ii) any tax withheld
to the Internal Revenue Service, in accordance with the Fund's redemption and
payment procedures described in the Prospectus or as otherwise reasonably
described in a written instruction from the Fund. In the case of an exchange of
Shares directly by a shareholder of record and not by means of a Computer Tape
submitted by an Approved Institution (or the Distributor or its agent acting on
behalf of such Approved Institution), upon deposit of moneys in an account by
the relevant Custodian against which the Transfer Agent is authorized by the
Fund to draw checks in connection with an exchange of Shares of a fund, the
Transfer Agent shall cancel the exchanged Shares, and withhold and pay taxes
required under this Agreement and applicable law. In the case of a redemption
of Shares pursuant to a Computer Tape, the Transfer Agent shall, on the next
Business Day, send the Fund a Computer Tape setting forth the amount of
redemption proceeds due each Approved Institution. If such Approved Institution
(or the Distributor or its agent acting on behalf of such Approved Institution)
has previously furnished the Transfer Agent withholding instructions with
respect to such redemption or any exchange of Shares pursuant to a Computer
Tape, the Transfer Agent shall include in the Computer Tape furnished to the
Fund information as to the amount of such withholding.
5.9. The Transfer Agent shall not be required to issue Shares of any fund
(other than with respect to the reinvestment of dividends or distributions on
shares owned by an existing shareholder if so stated in the Certificate) after
it has received a Certificate stating that the sale of Shares of that fund has
been suspended or discontinued.
5.10. The Transfer Agent shall not be responsible for the payment of any
original issue or other taxes required to be paid by the Fund in connection with
the issuance of any Shares.
5.11. The Transfer Agent shall not be responsible for issuing or effecting
any "stop transfer" or other similar order or restrictions on any Shares held in
the name of an Approved Institution. In the case of Shares registered in the
name of a shareholder other than an Approved Institution as to which a "stop
transfer" or other similar order or restriction applies, the Transfer Agent will
adhere to the terms of such stop transfer or similar order, except that it may
rely on a Certificate to effect a redemption, exchange or transfer of such
Shares, notwithstanding such stop order or restriction.
5.12. The Transfer Agent shall accept (a) a Computer Tape which is
furnished by or on behalf of any Approved Institution (or the Distributor or its
agent acting on behalf of such Approved Institution) and represented to be
instructions with respect to the transfer of Shares from one account of such
Approved Institution to another such account, and (b) as to Shares standing
directly in the name of a shareholder other than an Approved Institution,
transfer instructions in proper form in accordance with
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the Fund's Prospectus and the Transfer Agent's rules described herein, and shall
effect the transfer specified in said Computer Tape or transfer instructions,
provided that any necessary documents or Share certificates have been tendered
to the Transfer Agent.
5.13. (a) Except as otherwise provided in sub-paragraph (b) of this
Section 5.13 and in Section 5.14, Shares will be transferred, exchanged or
redeemed other than pursuant to Computer Tapes from an Approved Institution (or
the Distributor on its agent acting on behalf of such Approved Institution) upon
presentation to the Transfer Agent of endorsed Share certificates or, in the
case of uncertificated Shares, instructions endorsed in proper form in
accordance with the Prospectus as stated in Section 5.4, accompanied by such
documents as the Transfer Agent reasonably deems necessary to evidence the
authority of the person making such transfer, exchange or redemption, and
bearing satisfactory evidence of the payment of transfer taxes. In the case of
small estates, where no administration is contemplated, the Transfer Agent may,
when furnished with an appropriate small estates affidavit under applicable law
or with a surety bond, and without further approval of the Fund, transfer or
redeem Shares registered in the name of a decedent if the current market value
of the Shares being redeemed or transferred does not exceed such amount as may
from time to time be prescribed by the applicable state statutes and
regulations. The Transfer Agent reserves the right to refuse to transfer,
exchange or redeem Shares until it is reasonably satisfied that the endorsement
on the Share certificate or instructions is valid and genuine, and for that
purpose it will require, unless otherwise instructed by an Officer, a signature
guarantee as stated in Section 5.4 of this Agreement. The Transfer Agent also
reserves the right to refuse to transfer, exchange or redeem Shares until it is
reasonably satisfied that the requested transfer, exchange or redemption is
legally authorized, or until it is reasonably satisfied that there is no basis
to any claims adverse to such transfer, exchange or redemption. The Transfer
Agent may, in effecting transfers, exchanges and redemptions of Shares, rely
upon those provisions of the Uniform Act for the Simplification of Fiduciary
Security Transfers or the Uniform Commercial Code, as the same may be amended
from time to time, applicable to the transfer of securities.
(b) Notwithstanding the foregoing or any other provision contained
in this Agreement to the contrary, the Transfer Agent shall be fully protected
by the Fund in requiring any instructions, documents, assurances, endorsements
or guarantees, including, without limitation, any signature guarantees, in
connection with a redemption, exchange or transfer of Shares whenever the
Transfer Agent reasonably believes that requiring the same would be consistent
with the transfer, exchange and redemption procedures described in the
Prospectus, or in any instructions or certificates provided to the Transfer
Agent by the Fund.
5.14. Notwithstanding any provision contained in this Agreement to the
contrary, the Transfer Agent shall not be expected to require, as a condition to
any transfer, redemption or exchange of any Shares pursuant to a Computer Tape,
any documents, including, without limitation, any documents of the kind
described in Section 5.13(a) to evidence the authority of the person requesting
the transfer, exchange or redemption and/or the payment of any transfer taxes,
and shall be fully protected in acting in accordance with the applicable
provisions of this Agreement.
5.15. Nothing contained in this Agreement shall constitute any agreement
or representation by the Transfer Agent to permit, or to agree to permit, any
Approved Institution to input information into the System, although the Transfer
Agent may, with the Fund's written permission, permit access to the
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System by an Approved Institution to retrieve data or information as to such
Approved Institution's accounts.
ARTICLE 6
DIVIDENDS AND DISTRIBUTIONS
6.1. The Fund shall furnish to the Transfer Agent a Certificate either (i)
setting forth with respect to each series of the Fund the date of the
declaration of a dividend or distribution, the date of accrual or payment
thereof, as the case may be, the record date as of which shareholders entitled
to payment or accrual, as the case may be, shall be determined, the amount per
Share of such dividend or distribution for each series of the Fund, the payment
date on which all previously accrued and unpaid dividends are to be paid, and
the total amount, if any, payable by the Transfer Agent with respect to such
dividend or distribution on such payment date, or (ii) stating that the
declaration of dividends and distributions shall be on a daily or other periodic
basis and containing information of the type set forth in subsection (i) hereof.
6.2. Upon the payment date specified in the relevant Certificate, the
Transfer Agent shall, in the case of a cash dividend or distribution, advise the
Fund (by telephone or other electronic transmission) of the amount of cash
necessary to make the payment of the dividend or distribution to the
shareholders of record as of such payment date, including the amounts to be paid
to Approved Institutions. The Fund shall be responsible for having the
appropriate Custodian transfer a sufficient amount of cash to a dividend
disbursement account maintained by the Fund for the relevant Series against
which the Transfer Agent shall cause checks, ACH or federal funds wire payment
to be drawn to the order of such shareholders or Approved Institutions in
payment of the dividend. The Transfer Agent shall not be liable for any
improper payments made in accordance with a Certificate described in Section
6.1. If the Transfer Agent shall not receive from the appropriate Custodian
sufficient cash to make payments of any cash dividend or distribution to
shareholders of the Fund as of the record date, the Transfer Agent shall, upon
notifying the Fund, withhold payment to all shareholders of record as of the
record date until sufficient cash is provided to the Transfer Agent unless
otherwise instructed by the Fund by a Certificate and acceptable to the Transfer
Agent. In the case of dividends or distributions reinvested in additional
Shares of a series of the Fund, the Transfer Agent shall follow the procedures
set forth in Section 5.5.
6.3. The Transfer Agent shall in no way be responsible for the
determination of the rate or form of dividends or capital gain distributions due
shareholders.
6.4. The Transfer Agent shall, upon request of the Fund, file such
appropriate information returns concerning the payment of dividends and capital
gain distributions and redemptions with the proper Federal, state and local
authorities as are required by law to be filed by the Fund but shall in no way
be responsible for the collection or withholding of taxes due on such dividends
or distributions or on redemption proceeds due shareholders, except and only to
the extent required of it by applicable law for accounts of shareholders other
than Approved Institutions. If any amount is to be withheld from any dividend
or distribution paid to, or exchange or redemption proceeds or other cash
distribution from, the account of an Approved Institution, such Approved
Institution (or the Distributor or its agent acting on behalf of such Approved
Institution) may advise the Transfer Agent of the amount to be withheld
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therefrom, and if such advice is provided in a timely manner to the Transfer
Agent, the Transfer Agent will provide a separate check for such amount to the
Approved Institution, which shall be responsible for the proper application of
such withheld amounts.
ARTICLE 7
CONCERNING THE FUND
7.1. The Fund shall promptly deliver to the Transfer Agent written notice
of any change in the Officers authorized to sign or give Share certificates or
Certificates, together with a specimen signature of each new Officer.
7.2. It shall be the sole responsibility of the Fund to deliver to the
Transfer Agent in a timely manner the Fund's currently effective Prospectus,
copies of any exemptive relief obtained by the Fund under applicable securities
laws and copies of any amendments to the Fund; Articles of Incorporation, By-
Laws and any other documents to be furnished by the Fund under this Agreement to
enable the Transfer Agent to carry out its duties hereunder, and, for purposes
of this Agreement, the Transfer Agent shall not be deemed to have notice of any
information contained in such Prospectus, exemptive relief or other document
until it is actually received by the Transfer Agent.
ARTICLE 8
CONCERNING THE TRANSFER AGENT
8.1. Subject to the standard of care set forth in Section 8.4, the Transfer
Agent shall not be liable and shall be fully protected in acting upon any
Computer Tape, Certificate, oral instructions, writing or document reasonably
believed by it to be genuine and to have been signed (in the case of written
instructions or documents) or made by the proper person or persons and shall not
be held to have any notice of any change of authority of any person until
receipt of written notice thereof from the Fund or such person. Subject to the
standard of care set forth in Section 8.4, the Transfer Agent shall be similarly
protected in processing Share certificates which it reasonably believes to bear
the proper manual or facsimile signatures of the Officers of the Fund and the
proper countersignature of the Transfer Agent or any prior transfer agent.
8.2. The Transfer Agent covenants that it shall carry out its
responsibilities under this Agreement in accordance and compliance with the
provisions of applicable laws and regulations governing its operation as a
transfer agent.
8.3. The Transfer Agent shall keep and maintain on behalf of the Fund such
records which the Fund or the Transfer Agent is, or may be, required to keep and
maintain pursuant to any applicable statutes, rules and regulations, including
without limitation Rule 31a-1 under the Investment Company Act of 1940, relating
to the maintenance of records in connection with the services to be provided
hereunder. The Transfer Agent agrees to make such records available for
inspection by the Fund at reasonable times and otherwise to keep confidential
all records and other information relative to the Fund and its shareholders,
except when the Transfer Agent reasonably believes it has been requested to
divulge
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such information by duly-constituted authorities or court process, or requested
by a shareholder with respect to information concerning an account as to which
such shareholder has either a legal or beneficial interest or when requested by
the Fund, the shareholder, or the dealer of record as to such account.
8.4 (a) The Transfer Agent shall not be liable for any loss or damage,
including, without limitation, attorneys' fees, expenses and court costs,
resulting from the Transfer Agent's actions or omissions to act under or in
connection with this Agreement and its duties and responsibilities hereunder,
except for any loss or damage arising out of its own failure to act in good
faith, or its negligence or willful misfeasance.
(b) The Transfer Agent shall, provided such coverage is readily
available to the Transfer Agent at reasonable rates and upon reasonable terms
and conditions, maintain an insurance policy or surety bond, in the face amount
of $10 million per covered transaction against losses suffered by the Transfer
Agent in excess of the policy deductibles arising from errors or omission on the
part of the Transfer Agent in carrying out its responsibilities under this
Agreement and other agreements. The Transfer Agent shall upon request, furnish
promptly to the Fund copies of all insurance policies maintained pursuant to
this Section 8.4(b) that have not previously been furnished to the Fund.
(c) Any costs or losses incurred by the Fund for the processing of
any purchase, redemption, exchange or other share transactions at a price per
share other than the price per share applicable to the effective date of the
transaction (the foregoing being generally referred to herein as "as of"
transactions) will be handled in the following manner:
1. For each calendar year, if all "as of" transactions for the year
resulting from the actions or inactions of the Transfer Agent,
taken in the aggregate, result in a net loss to the Fund ("net
loss"), Transfer Agent will reimburse the Fund for such net loss,
except to the extent that such net loss may be offset by
application of a "net benefit" to the Fund carried over from
prior calendar years pursuant to sub-paragraph 2 immediately
below.
2. For each calendar year, if all "as of" transactions for the year
resulting from the actions or inactions of the Transfer Agent,
taken in the aggregate, result in a net benefit to the Fund ("net
benefit"), the Fund shall not reimburse the Transfer Agent for
the amount of such net benefit; however, any "net benefit" for
any calendar year may be used to offset, in whole or in part, any
"net loss" suffered by the Fund in any future calendar year so as
to reduce the amount by which the Transfer Agent shall be
required to reimburse the Fund for such "net loss" in such year
pursuant to sub-paragraph 1 immediately above.
3. Any "net loss" for which the Transfer Agent reimburses the Fund
in any calendar year shall not be carried over into future years
so as to offset any "net benefit" in such future years.
8.5 The Fund shall indemnify and exonerate, save and hold harmless the
Transfer Agent and its officers, directors, employees and agents (hereinafter
the Transfer Agent and such persons are referred to as "Indemnitees") from and
against any and all liabilities or losses arising from claims or
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demands (whether with or without basis in fact or law), and from any and all
expenses (including, without limitation, reasonable attorney's fees, expenses
and court costs associated with defending against such claims and demands,) of
any nature which any Indemnitee may sustain or incur or which may be asserted
against any Indemnitee by any person arising out of or in any manner related to
any action taken or omitted to be taken by the Transfer Agent in good faith and
without negligence or willful misconduct in reasonable reliance upon (i) any
provision of this Agreement; (ii) the Prospectus; (iii) any instruction or order
including, without limitation, any Computer Tape reasonably believed by the
Transfer Agent to have been received from an Approved Institution (or the
Distributor or its agent acting on behalf of such Approved Institution); (iv)
any instrument or order reasonably believed by the Transfer Agent to be genuine
and to be signed, countersigned or executed by any duly authorized Officer, (v)
any Certificate or other instructions of an Officer, (vi) any opinion of legal
counsel for the Fund; (vii) any records or data supplied by the Fund's prior
transfer agent; or (viii) any order of any court, arbitration panel or other
judicial entity.
8.6. At any time the Transfer Agent may apply to an Officer of the Fund for
written instructions with respect to any matters arising in connection with the
Transfer Agent's duties and obligations under this Agreement, and the Transfer
Agent shall not be liable for any action taken or omitted by it in good faith
and without negligence or willful misconduct in accordance with such written
instructions. The Transfer Agent may consult with counsel to the Fund, at the
expense of the Fund and shall be fully protected with respect to anything done
or omitted by it in good faith and without negligence or willful misfeasance in
accordance with the advice or opinion of counsel to the Fund. Such application
by the Transfer Agent for written instructions from an Officer of the Fund may,
at the option of the Transfer Agent, set forth in writing any action proposed to
be taken or omitted by the Transfer Agent with respect to its duties or
obligations under this Agreement and the date on and/or after which such action
shall be taken, and the Transfer Agent shall not be liable (other than for its
bad faith, negligence or willful misfeasance) for any action taken or omitted in
accordance with a proposal included in any such application on or after the date
specified therein unless, prior to taking or omitting any such action, the
Transfer Agent has received written instructions in response to such application
specifying the action to be taken or omitted.
8.7. Any report, confirmation or other document furnished to the Fund or to
an Approved Institution as part of the Transfer Agent's responsibilities under
this Agreement shall be deemed final and conclusive on the 8th Business Day
after such report, confirmation or document has been furnished to the Fund or
Approved Institution, as the case may be, and the Transfer Agent shall not be
liable to the Fund or such Approved Institution under this Agreement as to any
error or omission in such report, confirmation or document that is not reported
to the Transfer Agent within such 7-day period.
8.8. The Transfer Agent shall deliver Share certificates by courier or by
certified or registered mail to the shareholder's address in the records of the
Transfer Agent. The Transfer Agent shall advise the Fund of any Share
certificates returned as undeliverable after being transmitted by courier or
mailed as herein provided for.
8.9. The Transfer Agent may issue new Share certificates in place of Share
certificates represented to have been lost, stolen, or destroyed upon receiving
instructions satisfactory to the Transfer Agent. If the Transfer Agent receives
written notification from the owner of the lost, destroyed, or stolen Share
certificate within a reasonable time after the owner has notice of such loss,
destruction or
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theft, the Transfer Agent shall issue a replacement Share certificate upon
receipt of an affidavit or affidavits of loss or nonreceipt and an indemnity
agreement executed by the registered owner or his legal representative, and
supported (a) in the case of a certificate having a value at the time of
replacement of less than $100, by a fixed penalty surety bond for twice the
then-current market value of Shares represented by said certificate and (b) in
the case of a certificate having a value at time of replacement of $100 or more,
by an open penalty bond, in form satisfactory to the Transfer Agent or (c) by
such other documentation or reasonable assurances in a particular case as may be
set forth in a Certificate. If the Fund receives such written notification from
the owner of the lost, destroyed or stolen Share certificate within a reasonable
time after the owner has notice of it, the Fund shall promptly notify the
Transfer Agent. The Transfer Agent may issue new Share certificates in exchange
for, and upon surrender of, mutilated Share certificates.
8.10. The Transfer Agent will supply shareholder lists to the Fund from
time to time upon receiving a request therefor from an Officer of the Fund.
8.11. At the request of an Officer, the Transfer Agent will address and
mail such appropriate notices to shareholders as to the Fund may direct, at the
Fund's expense.
8.12. Notwithstanding any of the foregoing provisions of this Agreement,
the Transfer Agent shall be under no duty or obligation to inquire into, and
shall not be liable for:
(a) The legality of the issue or sale of any Shares, the sufficiency
of the amount to be received therefor, or the authority of an Approved
Institution or of the Fund, as the case may be, to request such sale or
issuance;
(b) The legality of a transfer, exchange or of a redemption of any
Shares by an Approved Institution, the propriety of the amount to be paid
therefor, or the authority of an Approved Institution to request such transfer,
exchange or redemption;
(c) The legality of the declaration of any dividend or capital gains
distribution by the Fund, or the legality of the issue of any Shares in payment
of any Share dividend or distribution; or
(d) The legality of any recapitalization or readjustment of the
Shares.
8.13. The Transfer Agent shall be entitled to receive, and the Fund hereby
agrees to pay to the Transfer Agent for its performance hereunder, including its
performance of the duties and functions set forth in Appendix B hereto, (i) its
reasonable out-of-pocket expenses (including without limitation legal expenses,
court costs, and attorney's fees associated with litigation or arbitration)
incurred in connection with this Agreement and its performance hereunder and
(ii) such compensation as is specified in Appendix C hereto as such fees may be
amended from time to time by agreement in writing by the Transfer Agent and the
Fund.
8.14. The Transfer Agent shall have no duties or responsibilities
whatsoever except such duties and responsibilities as are specifically set forth
in this Agreement, and no covenant or obligation shall be implied in this
Agreement against the Transfer Agent.
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8.15. The Transfer Agent shall indemnify and exonerate, save and hold
harmless the Fund, and its officers, directors, employees and agents, from and
against any and all liabilities or losses arising from claims and demands
(whether with or without basis in fact or law), and from any and all expenses
(including, without limitation, reasonable attorney's fees, expenses and court
costs), of any nature which the Fund or any officer, director, employee or agent
may sustain or incur or which may be asserted against them by any person arising
out of or in any manner related to the Transfer Agent's failure to comply with
the terms of this Agreement or which arise out of the Transfer Agent's
negligence or willful misconduct provided, however, that the Transfer Agent
shall not indemnify and exonerate, save and hold harmless, the Fund, its
officers, directors, employees, and agents for anything arising out of or in any
manner related to the Fund's failure to comply with the terms of this Agreement
or which arises out of the Fund's, or any officer's, director's, employee's or
agent's (other than the Transfer Agent) negligence or willful misconduct or the
Transfer Agent's reliance on information or instructions received from, or
issued on behalf of, the Fund.
ARTICLE 9
TERMINATION
9.1. The initial term of this Agreement shall commence on the Effective
Date and shall continue through June 5, 1998 (the "Initial Term") unless earlier
terminated pursuant to Section 9.2. Thereafter, this Agreement shall continue
from day to day thereafter (such period shall be referred to as the "Renewal
Term"), until either of the parties hereto terminates this Agreement by giving
at least 30 days prior written notice to the other party, whereupon this
Agreement shall terminate automatically upon the earlier of the expiration of
the 30 day period specified in the written notice or on August 1, 1998. For
every business day which the Agreement continues past June 30, 1998, the Fund
shall pay to the Transfer Agent a daily processing fee of $5,000. This daily
processing fee is in addition to any other fees payable under this Agreement and
it is agreed by the Fund and the transfer Agent that this daily processing fee
is not a penalty but is a reasonable estimate of the expenses that would be
incurred by the Transfer Agent in continuing to offer the Fund the services
provided for under this Agreement. In no event shall the term of this
Agreement, including any "Renewal Term" continue past August 1, 1998. In the
event such notice of termination is given by the Fund, it shall be accompanied
by a copy of a resolution of the Board of Directors of the Fund, certified by
the Secretary or any Assistant Secretary, electing to terminate this Agreement.
In the event such notice is given by the Transfer Agent, the Fund shall, on or
before the termination date, deliver to the Transfer Agent a copy of a
resolution of its Board of Directors certified by the Secretary or any Assistant
Secretary designating a successor transfer agent or transfer agents. In the
absence of such designation by the Fund, the Transfer Agent may designate a
successor transfer agent. If the Fund fails to designate a successor transfer
agent, the Fund shall, upon the date specified for termination of this Agreement
and delivery of the records maintained hereunder, be deemed to be its own
transfer agent and the Transfer Agent shall thereby be relieved of all duties
and responsibilities pursuant to this Agreement.
9.2 Notwithstanding Section 9.1 hereof, this Agreement may be terminated
at any time by the Fund upon not less than 60 days' written notice from the Fund
to the Transfer Agent notifying the Transfer Agent: (i) if a majority of the
Directors who are not "interested persons" (as that term is defined in the
Investment Company Act of 1940) upon completion of the procedures set forth
below have reasonably made a specific finding that the Transfer Agent has failed
on a continuing basis to perform
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its duties pursuant to this Agreement in a satisfactory manner consistent with
then current industry standards and practices or (ii) if there is instituted or
pending an action or proceeding by or before any court or governmental,
administrative or regulatory agency against or involving the parties hereto,
their affiliates, the Directors of the Fund or any of them and challenging the
making of this Agreement or alleging that any material term of the Agreement is
contrary to law or any governmental agency has threatened in writing to commence
such an action or proceeding. Prior to any termination pursuant to clause (i),
the Board of Directors of the Fund shall provide the Transfer Agent with a
written statement of the specific aspects of the Transfer Agent's performance of
its duties that are unsatisfactory, the specific incident or incidents giving
rise to the Board of Directors' conclusion and any written material that the
Board of Directors' relied upon in making such a determination. The Transfer
Agent shall have 30 days to respond to such written statement. If no response is
made, or if, after reasonable consideration of the response of the Transfer
Agent, such response is unsatisfactory to the Board of Directors, then the Board
of Directors of the Fund may terminate the Agreement pursuant to clause (i)
thereof. For purposes of making a finding as contemplated by clause (i) above,
the Transfer Agent shall be, absent unusual circumstances, conclusively presumed
to have failed on a continuing basis to perform its duties pursuant to this
Agreement in a satisfactory manner consistent with the industry standards and
practices prevailing on the date of this Agreement if any of the following
should occur:
(1) The Transfer Agent through its fault is unable (more than once in
a twelve-month period) to process daily activity for any two successive Business
Days and to confirm information generated by such activity by the fourth
Business Day following the later of such two Business Days. (For example,
assuming no holidays, daily activity on a Monday and Tuesday is not confirmed by
the following Monday.)
(2) The Transfer Agent through its fault is unable (more than two
times in any twelve-month period) to provide system access to personnel of an
Approved Institution for six hours between 9:00 a.m. and 5:00 p.m. Chicago time
on three successive Business Days.
(3) The Transfer Agent through its fault is unable (more than twice in
any one year) to create and mail dividend checks within four Business Days after
the Fund's payable date (assuming that the required information has been
furnished to the Transfer Agent on the record date).
(4) The Transfer Agent through its fault is unable to instruct various
financial institutions on daily money movements from and to the Funds'
Custodians for two successive Business Days by the Fourth Business Day following
the later of such two Business Days. (For this purpose, instructions based on
reasonable estimates are treated as fulfilling the Transfer Agent's obligations
hereunder.)
(5) The Transfer Agent through its fault is unable (more than twice in
any twelve-month period) to transmit dividend activity to an Approved
Institution within five Business days from the relevant Fund's payable date.
For purposes of the foregoing, an event described in any of the foregoing
clauses 1 through 5 shall be deemed not to have occurred if the Transfer Agent's
inability to perform is a result, directly or indirectly of faulty or inadequate
performance by service provider including, but not limited to, telephone
companies, pricing services, Nuveen & Co., Approved Institutions, and banks
other than the Transfer
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Agent and its agents and employees or a result, directly or indirectly, of other
events out of the Transfer Agent's reasonable control. Also for the purposes of
the foregoing, if the Transfer Agent processes transactions or instructions (as
the case may be) as required hereunder within the time periods indicated but
more than 10% of the transactions, checks or instructions, as the case may be,
are inaccurate in any material respect, and are not corrected within the
requisite time then the Transfer Agent shall be deemed to have been unable to
perform the relevant service within the requisite time.
9.3. In the event the Fund or the Transfer Agent terminates the Transfer
Agency Agreement at any time, the Fund shall be responsible for the payment of
any and all additional fees and expenses of the Transfer Agent relating to the
conversion to the new Transfer Agent. Included in these expenses will be any
travel/entertainment expenses incurred by the Transfer Agent related to
preparation for the conversion that exceed $2,000 in the aggregate per month.
Upon termination of this Agreement, the Transfer Agent will facilitate transfer
of the records maintained by it hereunder and cooperate with such successor
transfer agent as may be designated pursuant to the provisions of Section 9.1
hereof with respect to delivery of such records and assumption by such successor
transfer agent of its duties. The records will be delivered to the successor
transfer agent in the format in which they are maintained and all shareholder
records currently maintained in the ORIN computer system or on imaging discs
will be delivered in either their current format or at the expense of the Fund
will be converted into another format acceptable to the Fund and Transfer Agent.
The Fund must request the conversion of the imaging files to another acceptable
format on or before January 1, 1998 in order to allow the Transfer Agent
sufficient time to convert the records. If no such request is made on or before
that date, the shareholder records will be delivered in the format in which they
are currently stored by the Transfer Agent. The Fund shall be responsible for
any and all expenses related to the delivery of all records and, if applicable,
the conversion of the shareholder records from their current format to any other
format as elected by the Fund.
Upon termination of the Transfer Agency Agreement, the Transfer Agent shall
assist the Fund in transferring any bank accounts currently existing for the
payment of dividends and distributions or redemption of shares of the Fund to
the successor transfer agent. If the Fund elects not to transfer those
accounts, the Transfer Agent shall maintain the accounts for a period of 12
months from termination of this Agreement and then close the accounts and return
any remaining monies in those accounts to the Fund. The Fund shall be
responsible for keeping sufficient funds in those accounts to clear any
outstanding checks and the Transfer Agent shall have no responsibility for any
checks that do not clear that account for any reason.
Upon the termination of the Transfer Agency Agreement and for a period of three
(3) months thereafter, the Transfer Agent shall identify a specific person to
help interpret records for the Fund or the successor transfer agent. All
requests from the Fund or the successor transfer agent shall be directed to that
person. The Fund shall be responsible for any and all expenses related to such
assistance.
Upon termination of the Transfer Agency Agreement, the Fund and/or the successor
transfer agent shall be responsible for any and all regulatory and/or tax
reporting that may be required for the calendar year during which the
termination of the Agreement occurs. The Transfer Agent will account to the
successor transfer agent or the Fund for any withholding liability accrued for
any taxes withheld during any prior of that year in which it acted as transfer
agent for the Fund, including but not limited to TEFRA.
Page 17
<PAGE>
ARTICLE 10
ADDITIONAL SERIES
10.1. In the event that the Fund establishes one or more Series in
addition to the Series named herein with respect to which it desires to have the
Transfer Agent render services as transfer agent under the terms hereof, it
shall so notify the Transfer Agent in writing at least 60 days in advance of the
sale of Shares of such Series and shall deliver to the Transfer Agent the
documents listed in Section 2.3 with respect to such Series. Unless the
Transfer Agent declines in writing within a reasonable time to provide such
services, the Shares of such Series shall be subject to this Agreement.
ARTICLE 11
MISCELLANEOUS
11.1. The Fund agrees that prior to effecting any change in the Prospectus
which would increase or alter the duties and obligations of the Transfer Agent
hereunder, it shall advise the Transfer Agent of such proposed change at least
30 days prior to the intended date of the same, and shall proceed with such
change only if it shall have received the written consent of the Transfer Agent
hereto, and shall have received and agreed to the schedule of charges, if any,
specified by the Transfer Agent necessary to effect such change.
11.2. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Fund shall be sufficiently given if addressed
to the Fund and mailed or delivered to it at its office at 333 West Wacker
Drive, Chicago, Illinois 60606, Attention: Mr. Stuart Rogers, or at such other
place as the Fund may from time to time designate in writing.
11.3. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Transfer Agent shall be sufficiently given if
addressed to the Transfer Agent, Attention: President, and mailed or delivered
to it at its office at 6803 South Tucson Way, Englewood, Colorado 80112, with a
copy to be sent to Andrew J. Donohue at OppenheimerFunds, Inc. Two World Trade
Center, New York, NY 10048 or at such other place as the Transfer Agent may from
time to time designate in writing.
11.4. This Agreement may not be amended or modified in any manner except
by a written agreement executed by both parties.
11.5. This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successors and assigns; provided, however, that
this Agreement shall not be assignable by the Fund or the Transfer Agent without
the written consent of the other party. A change of ownership of the Transfer
Agent as a result of an internal reorganization of the Transfer Agent, its
parent corporation or affiliates shall not be deemed to be an "assignment"
hereunder. A change in "control" (as defined under the Investment Company Act
of 1940) of the Transfer Agent's parent corporation shall not be deemed an
"assignment" hereunder. A sale of a controlling interest in the capital stock
or of all or substantially all of the assets of the Transfer Agent to a third
party unaffiliated with the Transfer Agent or its parent corporation shall be
deemed to be an "assignment" hereunder.
Page 18
<PAGE>
11.6. This Agreement shall be governed by and construed in accordance with
the laws of the State of Colorado applicable to agreements to be wholly
performed in that state.
11.7. This Agreement may be executed in any number of counterparts each of
which shall be deemed to be an original; but such counterparts shall, together,
constitute only one instrument.
11.8. The provisions of this Agreement are intended to benefit only the
Transfer Agent and the Fund, and no rights shall be granted to any other person
by virtue of this Agreement.
11.9. Neither the Fund nor the Transfer Agent will be liable or
responsible hereunder for delays or errors by reason of circumstances reasonably
beyond its control, including, without limitation, acts of civil or military
authority, national emergencies, labor difficulties, fire, mechanical breakdown,
flood, catastrophe, acts of God, insurrection, war, riots, or failure of
transportation, communication or power supply.
11.10. The Fund shall establish and maintain such bank accounts, with such
bank or banks as are selected by the Fund, as are necessary so that the Transfer
Agent may perform the services to be provided hereunder. To the extent that
performance of such services shall require the Transfer Agent directly to
disburse amounts for payments of dividends, redemption proceeds or other
purposes, the Fund shall provide such bank or banks with all instructions and
authorizations necessary to evidence the Transfer Agent's authority to effect
such transactions.
Page 19
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers, thereunto duly authorized, as of the day
and year first above written.
Attest: NUVEEN TAX-FREE RESERVES, INC.
/s/ Gifford R. Zimmerman Asst. Sec'y By: /s/ Anna Kucinskis, VP
- -------------------------------------- ------------------------------------
Name Title Name Title
Attest: SHAREHOLDER SERVICES, INC.
/s/ Kathryn L. Kluck AVP By: /s/ Barbara Hennigar, President
- -------------------------------------- ------------------------------------
Name Title Barbara Hennigar, President
Page 20
<PAGE>
NUVEEN TAX-FREE RESERVES, INC.
TRANSFER AGENCY AGREEMENT
Appendix A
Officer's Certificate
I, ____________________________, the Secretary of NUVEEN TAX-FREE RESERVES,
INC., a Maryland corporation (the "Fund"), do hereby certify that:
The following individuals have been duly authorized by the Directors of the
Fund in conformity with the Fund's Articles of Incorporation and By-Laws to
execute any Certificate, instruction, notice or other instrument, including an
amendment to Appendix B to this Agreement, or to give oral instructions on
behalf of the Fund, and the signatures set forth opposite their respective names
are their true and correct signatures.
NAME TITLE SIGNATURE
- ---- ----- ---------
________________________ Chairman ____________________________
________________________ President ____________________________
________________________ Secretary ____________________________
________________________ Trustee ____________________________
________________________ Vice President ____________________________
________________________ ______________ ____________________________
________________________ ______________ ____________________________
________________________ ______________ ____________________________
________________________ ______________ ____________________________
________________________ ______________ ____________________________
________________________ ______________ ____________________________
________________________ ______________ ____________________________
________________________________, Secretary
Name
Page 21
<PAGE>
NUVEEN TAX-FREE RESERVES, INC.
TRANSFER AGENCY AGREEMENT
Appendix B
Transfer Agent Services
SERVICE: SSI WILL:
- ------- --------
New Account Set-Ups Process new sales applications. Place
telephone calls to account representatives
as needed to clarify instructions for new
account set-ups.
Purchases - New and Subsequent Process mailed-in, lockbox, bank wire,
list billing, ACH, and telephone payments
as received. Coordinate and balance UIT
reinvestment payments.
Transfers Negotiate and process all transfer
requests.
Exchanges - Mail and Telephone Negotiate and process exchange requests.
Record telephone exchange requests.
Redemptions - Mail and Telephone Negotiate and process mailed in, ACH and
telephone redemption requests. Record
telephone redemption requests.
Wire Order Purchases and Redemptions Process wire order purchases and
redemptions for designated settlement
period accepted on recorded telephone
lines and via NSCC FUND/SERV. Process
purchases and redemptions for same day
wire settlement.
Account Maintenance Process all written and telephone
(Address Changes, Dividend Option maintenance. For address changes, prepare
Changes, Name Changes, Broker or and mail a notice of the address change to
Dealer Changes, etc.) the former address.
Certificate Issuances Issue certificates as requested by
shareholders.
Telephone Services Provide efficient handling of all incoming
shareholder and broker/dealer telephone
calls. Make outgoing clarification
calls/coordination with Chase on UIT/ETF
consolidations. Provide timely problem
resolution for all servicing calls.
Provide automated trend reporting.
Page 1
<PAGE>
SERVICE: SSI WILL:
- ------- --------
Correspondence with Shareholders Respond to all shareholder and
and Broker/Dealers broker/dealer written inquiries.
Document all correspondence
affecting shareholder accounts on the
Shareholder Accounting System.
Shareholder Confirms Prepare and mail confirmations of daily
(Daily/Monthly/Quarterly/Annual) account activity. Prepare and mail
monthly, quarterly, and annual
confirmations as directed by the fund.
Dealer Confirms Prepare and mail weekly dealer
confirmations listing activity on client
accounts as directed by the Fund.
Distribution Disbursements Prepare and mail cash distribution
checks. Process reinvested distributions.
Commission Statements Provide bimonthly commission statements
listing each purchase and the portion of
the sales charge paid to the
broker/dealer.
Commission Checks Provide bimonthly commission checks to
broker/dealers.
Daily Transmission of Reports Transmit daily transaction activity
reports, balancing reports, and sales
information via telephone lines to a
printer at Nuveen.
Fund Summary Sheets Prepare daily reports that summarize by
type of transaction all capital stock
activity for each fund. Transmit/download
wire/capital stock activity information to
Chase.
Sales Reporting Provide daily, weekly, monthly, quarterly,
and annual reports of sales information.
12b-1 Reporting Complete 12b-1 processing including
calculating the 12b-1 payment amounts and
sending checks to the broker/dealer home
offices. Provide a listing broken down by
sales representative within each branch.
Invalid Taxpayer Identification Mail Forms W-9 as required to validate
Number Solicitation and taxpayer identification numbers; institute
Backup Withholding backup withholding as required by IRS
regulations, and timely send all notices.
Regulatory Reporting Compute, prepare, and mail all necessary
reports to shareholders, federal, and/or
state authorities (Forms 1099-DIV, 1099-B,
and 1042S).
Page 2
<PAGE>
SERVICE: SSI WILL:
- ------- --------
Front-End Imaging of Documents Front-end Image all incoming documents.
Cost Basis Reporting Provide cost basis information as
available to shareholders annually for
use in determining capital gains and
losses.
Blue Sky Reporting Provide monthly report of purchases and
redemptions by state.
Financial Reporting Mailings Provide mail handling for 2 financial
reports per fund per year to Nuveen
shareholders.
Prospectus Mailings Provide mail handling for 1 prospectus
per fund per year to Nuveen
shareholders.
Proxy Solicitation and Tabulation Perform 1 proxy solicitation and
tabulation per fund per year.
Networking Accounts Provide transmission and appropriate
services for each network level.
Cash Availability Transmit mutual fund activity to
designated entity on a daily basis for
cash availability purposes.
Commission/12b-1 Balancing Provide balancing reports for
commission and 12b-1 payments.
Page 3
<PAGE>
NUVEEN TAX-FREE RESERVES, INC.
TRANSFER AGENCY AGREEMENT
Appendix C
Fee Schedule
The Transfer Agent will provide the transfer agent services listed on Appendix B
for the Fund at the rates set forth below:
Annual Transfer Agent Fees:
- --------------------------
From July 1, 1997 through termination
ANNUAL-PER-ACCOUNT FEES *
------------------------
First 20,000 Accts.** $ 24.80 per account
Next 30,000 Accts.** $ 22.50 per account
Over 50,000 Accts.** $ 21.40 per account
Out-Of-Pocket Expenses:
- ----------------------
Out-of-pocket expenses may be incurred by either the Fund or the Transfer
Agent and are not included in the annual Transfer Agent Fees. Those out-of-
pocket expenses directly incurred by the Transfer Agent will be billed to the
Fund on a monthly basis. These out-of-pocket expenses include, but are not
limited to, the printing of forms, envelopes, postage and proxy solicitation
fees for the shareholder mailings, costs of abandoned property reports or
searches for missing or inactive shareholders, equipment and system access
costs, microfilm, telephone line and usage charges, overnight express mail
charges, check signature plates and stamps, and programmer/analyst and testing
technician time beyond that agreed to in writing. Bank charges and earnings
credit will be billed directly to the Fund by United Missouri Bank (or other
banks). The Transfer Agent may require the prior payment of anticipated out-of-
pocket expenses, from time to time.
_________________
* Payable on a monthly basis for each non-retirement plan account in existence
at the end of the month. Retirement Plan accounts may be subject to a separate
fee schedule to be negotiated.
** The determination of the number of accounts for purposes of determining the
per account fee shall be based on all Nuveen Funds using the same fee schedule
and shall be allocated on a Fund by Fund basis in a manner determined by the
Transfer Agent based on the number of accounts in each fund.
The Transfer Agent shall, from time to time, but no more frequently than
monthly, send an invoice to the Fund itemizing the compensation and expense
reimbursement. The Fund shall pay such invoice (except to the extent that the
amount thereof is in dispute) by wire not later than 30 days after receipt of
the invoice.
<PAGE>
Exhibit 10
June 10, 1998
(202) 467-7662
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 special 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. 17 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 certification 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 "Charter");
(c) a certificate executed by Karen L. Healy, the Assistant Secretary of
the Fund, certifying as to, and attaching copies of, the Fund's
Charter 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
(d) a printer's proof, dated June 3, 1998, of the Amendment.
<PAGE>
Nuveen Tax-Free Reserves, Inc.
June 10, 1998
Page 2
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
Charter and for the consideration described in the Registration Statement, will
be legally issued, fully paid and nonassessable under 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,
/s/ Morgan, Lewis & Bockius LLP
MORGAN, LEWIS & BOCKIUS LLP
<PAGE>
EXHIBIT 11
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated April 15, 1998, and to all references to our Firm included in or made a
part of this registration statement of Nuveen Tax-Free Reserves, Inc.
ARTHUR ANDERSEN LLP
Chicago, Illinois
June 8, 1998
<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 28, 1998:
( .0005477 ) 365
( -------- ) X --- = 2.86%
( 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 28, 1998:
[ ( .0005477 ) ] 365/7
[ ( -------- ) + 1 ] - 1 = 2.90%
[ ( 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 28, 1998 is as follows:
2.86%
-------- = 4.74%
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
references to such documents.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-START> MAR-01-1997
<PERIOD-END> FEB-28-1998
<INVESTMENTS-AT-COST> 268980
<INVESTMENTS-AT-VALUE> 268980
<RECEIVABLES> 1508
<ASSETS-OTHER> 1113
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 271601
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 878
<TOTAL-LIABILITIES> 878
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 270723
<SHARES-COMMON-STOCK> 270723
<SHARES-COMMON-PRIOR> 304087
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 270723
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 10365
<OTHER-INCOME> 0
<EXPENSES-NET> 2064
<NET-INVESTMENT-INCOME> 8301
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 8301
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 8301
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 175436
<NUMBER-OF-SHARES-REDEEMED> (216681)
<SHARES-REINVESTED> 7881
<NET-CHANGE-IN-ASSETS> (33365)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1376
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2243
<AVERAGE-NET-ASSETS> 275173
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .03
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.03)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
EXHIBIT 99(b)
Certified Resolution
--------------------
The undersigned, Gifford R. Zimmerman, 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 22, 1998, and (3) that said resolution has not
been amended or rescinded and remains in full force and effect.
April 28, 1998
/s/ Gifford R. Zimmerman
-------------------------------
Gifford R. Zimmerman, Secretary
<PAGE>
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 Timothy R. Schwertfeger, Anthony T.
Dean, Bruce P. Bedford, 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 resubstitution, 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 perform each and every act and
thing requisite or necessary to be done, 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.
<PAGE>
EXHIBIT 99(c)
NUVEEN TAX-FREE RESERVES, INC.
------------------
POWER OF ATTORNEY
------------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of the above
referenced organization, hereby constitutes and appoints TIMOTHY R.
SCHWERTFEGER, ANTHONY T. DEAN, BRUCE P. BEDFORD, LARRY W. MARTIN, GIFFORD R.
ZIMMERMAN, AND THOMAS S. HARMAN each of them (with full power to each of them to
act alone) his true and lawful attorney-in-fact and agent, for him on his behalf
and in his name, place and stead, in any and all capacities, to sign, execute
and affix his seal thereto and file one or more Registration Statements on Form
N-1A, under the Securities Act of 1933, as amended, and the Investment Company
Act of 1940, as amended, including any amendment or amendments thereto, with all
exhibits, and any and all other documents required to be filed with any
regulatory authority, federal or state, without limitation, granting unto said
attorneys, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in order to effectuate
the same as fully to all intents and purposes as he might or could do if
personally present, hereby ratifying and confirming all that said attorneys-in-
fact and agents, or any of them, may lawfully do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned director of the above-referenced
organization has hereunto set his hand this 1st day of July, 1997.
/s/ Judith M. Stockdale
-----------------------
STATE OF ILLINOIS )
)SS
COUNTY OF COOK )
On this 1st day of July, 1997, personally appeared before me, a Notary
Public in and for said County and State, the person named above who is known to
me to be the person whose name and signature is affixed to the foregoing Power
of Attorney and who acknowledged the same to be his voluntary act and deed for
the intent and purposes therein set forth.
- --------------------------------
"OFFICIAL SEAL"
VIRGINIA L. CORCORAN
Notary Public, State of Illinois
My Commission Expires 10/26/97
- --------------------------------
/s/ Virginia L. Corcoran
--------------------------------
My Commission Expires: 10/26/97
