<PAGE>
As filed with the Securities and Exchange Commission on May 13, 1999
- --------------------------------------------------------------------------------
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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. 18
--- [X]
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
[_]
File No. 811-3531
Amendment No. 19
--- [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 pursuant to paragraph (b)
[_] on June 25, 1999 pursuant to para-
graph (a)(1)
[X]
on (date) pursuant to paragraph (b)
75 days after filing pursuant to par-
[_] [_] agraph (a)(2)
60 days after filing pursuant to paragraph (a)(1)
[_] on (date) pursuant to paragraph
[_] (a)(2) of Rule 485.
If appropriate, check the following box:
[_]
This post-effective amendment designates a new effective date for a previ-
ously filed post-effective amendment.
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<PAGE>
NUVEEN TAX-FREE RESERVES, INC.
CONTENTS
OF
POST-EFFECTIVE AMENDMENT NO. 18
TO
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
FILE NO. 2-78736
AND
AMENDMENT NO. 19
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
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>
PART A--PROSPECTUS
NUVEEN TAX-FREE RESERVES , INC.
333 West Wacker Drive
Chicago, Illinois 60606
<PAGE>
June 25, 1999 Prospectus
NUVEEN
Mutual Funds
Nuveen Municipal Money Market Fund
For investors
seeking
attractive
tax-free income
and stability of
principal.
Featuring Portfolio Management By Nuveen Investment Advisory Services
A Premier Adviser/SM/ for Income Investing
- -----------------------------------------------------
The Securities and Exchange Commission has not
approved or disapproved these securities or passed
upon the adequacy of this prospectus. Any
representation to the contrary is a criminal offense.
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<PAGE>
Table of Contents
<TABLE>
<CAPTION>
<S> <C>
Section 1 The Fund
This section provides you with an overview of the fund including investment
objectives, portfolio holdings and historical performance information.
Introduction 1
Nuveen Municipal Money Market Fund 2
Section 2 How We Manage Your Money
This section gives you a detailed discussion of our investment and risk
management strategies.
Who Manages the Fund 4
What Securities We Invest In 4
How We Select Investments 5
How We Manage Risk 6
Section 3 How You Can Buy and Sell Shares
This section provides the information you need to move money into and out of
your account.
How to Buy Shares 8
Systematic Investing 9
Special Services 9
How to Sell Shares 10
Section 4 General Information
This section summarizes the fund's distribution policies and other general
information.
Dividends, Distributions and Taxes 12
Taxes and Tax Reporting 12
Service Plan 13
Net Asset Value 14
Fund Service Providers 14
Year 2000 14
Section 5 Financial Highlights
This section provides the fund's financial performance
for the past five years. 16
</TABLE>
We have used the icons below throughout this prospectus to make it easy for you
to find the type of information you need.
Investment
Strategy
Risks
Fees, Charges
and Expenses
Shareholder
Instructions
Performance and
Current Portfolio
Information
<PAGE>
June 25, 1999
Section 1 The Fund
Nuveen Municipal Money Market Fund
Introduction
This prospectus is intended to provide important information
to help you evaluate whether the Nuveen Municipal Money
Market Fund may be right for you. Please read it carefully
before investing and keep it for future reference.
Regular Income, Convenience and Stability of Principal
Tax-free money market funds offer you the opportunity to earn
tax-free income on your cash reserves while also providing
easy access to your money and stability of principal. They
can provide a convenient way to make gradual transfers into
stock or bond funds, or to lower the overall risk of your
portfolio.
The fund invests in high quality municipal money market
securities that its investment adviser believes present
minimal credit risks. The fund's investment policies are
designed to mitigate overall risk and maintain a constant
price per share of $1.00, but there can be no guarantee of
this.
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NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
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Section 1 The Fund 1
<PAGE>
Nuveen Municipal Money Market Fund
Fund Overview
Investment Objective
The fund's investment objective is to provide as high a level of current income
exempt from regular federal income taxes as is consistent with the stability of
principal and the maintenance of liquidity.
How the Fund Pursues Its Objective
The fund invests substantially all of its assets in a diversified portfolio of
high quality municipal money market instruments that the fund's investment
adviser believes present minimal credit risks. The adviser selects money market
instruments based on its assessment of current market interest rates and its
market outlook. The adviser seeks to identify money market instruments with
favorable characteristics the adviser believes are not yet recognized by the
market.
What are the Risks of Investing in the Fund?
While the fund invests in securities its investment adviser believes present
minimal credit and interest rate risks, the fund is not risk free. The value of
the fund's investments may be adversely affected by changes in prevailing
interest rates or an issuer's credit quality. The fund's investment policies are
designed to mitigate these risks and maintain a constant price per share of
$1.00, but there can be no guarantee of this. Like any mutual fund investment,
loss of money is a risk of investing.
Is This Fund Right for You?
The fund may be appropriate for you if you seek to:
. Earn monthly tax-free income on your cash reserves with check-writing
privileges;
. Maintain stability of principal;
. Make gradual transfers into stock or bond funds; or
. Lower the overall risk of your investment portfolio.
You should not invest in this fund if you seek to pursue long-term growth of
principal. You may not want to invest in this fund if you are subject to federal
alternative minimum tax.
How the Fund Has Performed
The chart and table below illustrate annual fund returns for each of the past
ten years as well as annualized fund and index returns for the one-, five-year,
ten-year and since inception periods ended December 31, 1998. This information
is intended to help you assess the variability of fund returns over the past ten
years (and consequently, the potential rewards and risks of a fund investment).
Of course past performance is not necessarily an indication of future
performance.
Total Returns
Annual Returns*
7% 1989 5.96%
6% 1990 5.57%
5% 1991 4.23% [BAR CHART APPEARS HERE]
4% 1992 2.55%
3% 1993 1.88%
2% 1994 2.27%
1% 1995 3.32%
0% 1996 2.92%
1997 3.06%
1998 2.96%
/*/The year-to-date return as of March 31, 1999 was .61%.
During the last ten years ended December 31, 1998, the highest and lowest
quarterly returns were 1.50% and .44%, respectively, for the quarters ended June
30, 1989 and March 31, 1994.
Average Annual Total Returns for
the Periods Ended December 31, 1998
1 Year 5 Year 10 Year
--------------------------------
Nuveen Municipal Money Market Fund 2.96% 2.91% 3.46%
- ---------------------------------------------------------------------------
Lipper Index 3.04% 3.06% 3.58%
Based on the seven-day period ended December 31, 1998, the fund's yield was
3.06%, and the taxable equivalent yield (using maximum federal income tax rate
of 39.6%) was 5.07%. For the fund's current yields, please call Nuveen at
(800) 257-8787.
<PAGE>
What are the Costs of Investing?
Shareholder Transaction Expenses
Paid Directly From Your Investment
<TABLE>
<CAPTION>
<S> <C>
Maximum Sales Charge Imposed
on Purchases None
Maximum Sales Charge Imposed
on Reinvested Dividends None
Exchange Fees None
Annual Fund Operating Expenses/2/
Paid From Fund Assets
Management Fees .49%
12b-1 Distribution and Service Fees/3/ .20%
Other Expenses .26%
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Total Operating Expenses--Gross+ .95%
+ After Expense Reimbursements
Expense Reimbursements -.20%
Total Operating Expenses--Net .75%
</TABLE>
Total Operating Expenses--Net reflect the undertaking of the fund's adviser
to reimburse expenses through December 31, 1999, in an amount necessary to
limit total operating expenses to .75%. Thereafter, reimbursements may be
modified or discontinued at the adviser's discretion without notice.
Example
The following example is intended to help you compare the cost of investing
in the fund with the cost of investing in other mutual funds. The example
assumes you invest $10,000 in the fund for the time periods indicated, and
then redeem all your shares at the end of a period. The example also assumes
that your investment has a 5% return each year and that the fund's operating
expenses remain the same. Your actual returns and costs may be higher or
lower.
<TABLE>
<CAPTION>
<S> <C>
1 Year $ 86
3 Years $ 268
5 Years $ 466
10 Years $1,037
How the Fund Is Invested (as of 05/31/99)
Portfolio Statistics
Weighted Average Maturity (Days) 37
Credit Quality
Industry Diversification (Top 5)
Healthcare 19%
Tax Obligations/General 18%
Long-Term Care 13%
Utilities 12%
Industrial/Other 7%
</TABLE>
1. Lipper Index returns reflect the performance of funds in the Lipper Municipal
Money Market Index. Returns assume reinvestment of dividends and do not
reflect any applicable sales charges.
2. Expense information has been restated to reflect current fees payable under
the investment management agreement and 12b-1 Plan approved at the June 4,
1999 Shareholder Meeting.
3. The 12b-1 fees paid by the Fund increased since the last fiscal year to .20%
because the number of authorized dealers has increased and Nuveen has begun
retaining 12b-1 fees on accounts with no authorized dealer for which Nuveen
provides on-going shareholder account services.
Section 1 The Fund 3
<PAGE>
Section 2 How We Manage Your Money
To help you understand how the fund's assets are managed,
this section includes a detailed discussion of the adviser's
investment and risk management strategies. For a more
complete discussion of these matters, please consult the
Statement of Additional Information.
Who Manages the Fund
Nuveen Investment Advisory Services provides advisory and
investment management services to a broad range of clients.
Nuveen Investment Advisory Services is comprised of Nuveen
Advisory Corp. and Nuveen Institutional Advisory Corp., both
of which are wholly-owned subsidiaries of John Nuveen & Co.
Incorporated (Nuveen). Nuveen Advisory Corp. (Nuveen
Advisory) is the fund's investment adviser and as such is
responsible for the selection and on-going monitoring of the
securities in the fund's portfolio, managing the fund's
business affairs and providing certain clerical, bookkeeping
and other administrative services. Nuveen Advisory is located
at 333 West Wacker Drive, Chicago, IL 60606. For providing
these services, Nuveen Advisory is paid an annual management
fee. For the most recent fiscal year, the Fund paid .50% of
its average net assets to Nuveen Advisory for its services.
Founded in 1898, Nuveen has been synonymous with investments
that withstand the test of time. Today, we offer a broad
range of quality investments designed for individuals seeking
to build and maintain wealth. Nuveen is the sponsor and
principal underwriter of the fund's shares and has sponsored
or underwritten more than $60 billion of investment company
securities. Nuveen and its affiliates have approximately $50
billion in assets under management.
What Securities We Invest In
Municipal Money Market Securities
The Fund invests in high quality, short-term tax exempt debt
securities, commonly known as municipal money market
securities. Municipal money market securities pay income
which is exempt from regular federal income tax but may be
subject to the federal alternative minimum tax.
States and local governments, municipalities, agencies and
other governmental units issue municipal money market
securities to raise money for various public purposes, such
as building public facilities, refinancing outstanding debt
and financing general operating expenses. These securities
include general obligation bonds, which are backed by the
full faith and credit of the issuer and may be repaid from
any revenue source, and revenue bonds, which may be repaid
only from the revenue of a specific facility or source. These
securities also include notes, such as bond anticipation,
revenue anticipation, construction loans and bank notes, and
commercial paper.
4 Section 2 How We Manage Your Money
<PAGE>
Credit-Enhanced Investments
Some of the fund's investments may be backed by a letter of
credit or other type of credit enhancement. For example, if
an issuer does not have the desired credit rating, another
company may use its higher credit rating to back the issuer's
rating by selling the issuer a letter of credit. Investments
backed by a letter of credit are subject to the risk that the
company issuing the letter of credit will not be able to
fulfill its obligations to the fund, or is thought to be
unlikely to be able to do so. This could cause losses to the
fund and affect its share price.
Variable Rate and Floating Rate Demand Notes
We expect variable rate and floating rate securities will
comprise a large portion of the fund's portfolio. These
investments may have stated maturities of more than 397 days,
but generally allow the holder to receive payment of
principal plus accrued interest much sooner than this.
Because their interest rates are not fixed, the income earned
by the fund on these securities generally will fluctuate with
changes in short-term interest rates.
When-Issued and Delayed Delivery Transactions
The fund may buy or sell securities on a when-issued or
delayed delivery basis, paying for or taking delivery of the
securities at a later date, normally within 15-45 days of the
trade. These transactions involve an element of risk because
the value of the security to be purchased may decline before
the settlement date.
Temporary Strategies
The fund on a temporary basis may invest in taxable money
market securities. Taxable money market securities include
U.S. government securities, quality commercial paper or
similar fixed-income securities with remaining maturities of
one year or less. The fund will only do so under
extraordinary circumstances or unusual market conditions.
Under these circumstances, the fund will not be pursuing its
investment objective.
How We Select Investments
Nuveen Advisory selects money market instruments based on its
assessment of current market interest rates and its market
outlook. Portfolio managers are supported by a team of
specialized research analysts who review securities available
for purchase, monitor the continued creditworthiness of the
fund's investments, and analyze economic, political and
demographic trends affecting the municipal money market. We
seek to identify money market instruments with favorable
characteristics we believe are not yet recognized by the
market. We then select those higher-yielding and undervalued
money market instruments that we believe represent the most
attractive values without adding undue risk. We actively
manage the maturity of the fund and its portfolio to
optimally balance the fund's yield with the fund's exposure
to interest rate risk.
How We Manage Risk
Risk is inherent in all investing. Investing in a mutual
fund -- even a money market fund -- involves risk, including
the risk that you may receive little or no return on your
investment or even that you may lose part of your investment.
In pursuing its investment objective, the fund assumes
investment risk, chiefly in the form of interest rate and
credit risk. The fund tries to limit risk by restricting the
types and maturities of the money market instruments it
purchases, and by diversifying its investment portfolio among
issuers and across different industries. Therefore, before
Section 2 How We Manage Your Money 5
<PAGE>
investing, you should consider carefully the following risks
that you assume when you invest in the fund.
Interest rate risk: Because the fund invests in fixed-income
securities, the fund is subject to interest rate risk.
Interest rate risk is the risk that the value of the fund's
portfolio will decline because of rising interest rates.
Interest rate risk is generally lower for shorter-term
investments and higher for longer-term investments.
To mitigate interest rate risk, the fund, under normal market
conditions, maintains an investment portfolio with an overall
weighted average maturity of 90 days or less. In addition,
the fund limits its investments to money market instruments
with remaining effective maturities of 397 days or less.
Credit risk: The fund is subject to credit risk. Credit risk
is the risk that an issuer of a money market instrument will
be unable to meet its obligation to make interest and
principal payments due to changing financial or market
conditions, or possibly due to Year 2000 issues (see below).
The fund attempts to mitigate credit risk by investing only
in high quality money market instruments that Nuveen Advisory
believes present minimal credit risks at the time of
purchase. High quality instruments are:
. rated in one of the two highest short-term rating
categories by at least two nationally recognized rating
services, or
. if only one service has rated the instrument, rated by that
service in one of its two highest short-term rating
categories, or
. unrated instruments that Nuveen Advisory judges to be of
comparable quality.
In addition, the fund will not invest more than 5% of its
total assets in money market instruments rated in the second
highest short-term rating categories or in their unrated
equivalents.
Year 2000 issues may affect the ability of municipal issuers
to meet their interest and principal payment obligations to
their bond holders, and may adversely affect the bonds'
credit ratings and values. Municipal issuers may have greater
Year 2000 risks than other issuers. Nuveen Advisory is
requesting information from municipal issuers so that Nuveen
Advisory can take the issuers' Year 2000 readiness, if made
available, into account in making investment decisions. There
can be no assurance that issuers will provide this
information to Nuveen Advisory, or that issuers will begin or
complete the work necessary to address any Year 2000 issues
on a timely basis. Generally, higher rated fixed-income
securities carry less credit risk than lower rated fixed-
income securities.
Concentration risk: Concentration risk is the risk that
economic or other developments affecting a single industry
may cause the value of related money market instruments to
decline.
To mitigate concentration risk, the fund will not invest more
than 25% of its assets in any one industry, excluding
governmental issuers. The fund may, however, invest more than
25% of its assets in a broad segment of the municipal market,
such as instruments issued to fund hospitals, housing or
airports, if Nuveen Advisory believes that the potential
returns justify any additional risks that may arise from
doing so. These policies on concentration risk may not be
changed without shareholder approval.
The fund may invest without limit in securities backed by
letters of credit or other credit enhancements issued by
banks and other financial institutions. As a result, changes
in the banking industry may cause the value of securities
backed by such credit enhancements to decline.
Insurance: The fund has purchased liability insurance against
a decline in the value of the fund's portfolio caused by the
default or bankruptcy of an issuer whose securities are owned
by the fund. The insurance covers substantially all of the
fund's investments except U.S. government securities. The
maximum total coverage for all Nuveen money market funds is
$50 million, with a deductible for each loss of 0.10% of the
fund's net assets. The fund pays the policy's premiums.
Coverage under the
An Important Note About Risk
Although the fund's investment policies are intended to minimize interest rate
and credit risk, there can be no guarantee of this.
6 Section 2 How We Manage Your Money
<PAGE>
policy is subject to certain conditions and may not be
renewable upon expiration. While the policy is intended to
provide some protection against credit risk and to help the
fund maintain a constant price per share of $1.00, there is
no guarantee that the insurance will do so.
Section 2 How We Manage Your Money 7
<PAGE>
Section 3 How You Can Buy and Sell Shares
We offer a number of services for your convenience. Please
see the Statement of Additional Information for further
details.
How to Buy Shares
The fund offers only a single class of shares. Fund shares
may be purchased at net asset value on any business day,
which is any day the Federal Reserve Bank of Boston is
normally open for business. Generally, the Bank is closed on
weekends and national holidays. The fund's net asset value is
determined at 12:00 noon Eastern Time on each business day,
and on other days where there is significant trading activity
in the fund's shares. If the fund receives your order in
proper form before 12:00 noon and the fund's custodian
receives federal funds from you before 3:00 p.m., Eastern
Time, you will receive the dividend declared and net asset
value computed on that day. Otherwise, you will receive the
next business day's dividend and net asset value.
Through a Financial Adviser
You may purchase shares through your financial adviser, who
can handle all the details for you, including opening a new
account. Financial advisers also can help you review your
financial needs and formulate long-term investment goals and
objectives. In addition, financial advisers generally can
help you develop a customized financial plan, select
investments, and monitor and review your portfolio on an on-
going basis to help assure that your investments continue to
meet your needs as circumstances change. Financial advisers
are paid for on-going investment advice and services either
from fund sales charges and fees or by charging you a
separate fee in lieu of a sales charge. If you do not have a
financial adviser, call (800) 257-8787 and Nuveen can refer
you to one in your area.
By Mail
You may open an account and buy shares through the mail by
completing the enclosed application and mailing it along with
your check to the fund, c/o Nuveen Investor Services, P.O.
Box 5186, Bowling Green Station, New York, NY 10274-5186.
Investment Minimums
The minimum initial investment is $3,000 ($50 if you
establish a systematic investment plan). Subsequent
investments must be in amounts of $50 or more. The fund
reserves the right to reject purchase orders and to waive or
increase the minimum investment requirements.
8 Section 3 How You Can Buy Sell Shares
<PAGE>
Systematic Investing
Once you have established a fund account, you may participate
in the fund's systematic investment plan. Systematic
investing allows you to make regular investments through
automatic deductions from your bank account or directly from
your paycheck. The minimum automatic deduction is $50 per
month. There is no charge to participate in the fund's
systematic investment plan. You can stop the deductions at
any time by notifying the fund in writing.
From Your Bank Account
You can make systematic investments by authorizing us to draw
preauthorized checks on your bank account. To do this, simply
complete the appropriate section of the account application
form or submit an account update form.
From Your Paycheck
With your employer's consent, you can make systematic
investments by authorizing your employer to deduct monies
from your paycheck. To do this, contact your financial
adviser or call Nuveen at (800) 257-8787.
Special Services
To help make your investing with us easy and efficient, we
offer you the following services at no extra cost.
Exchanging Shares
You may exchange fund shares into an identically registered
account at any time for an appropriate class of another
Nuveen mutual fund available in your state. Your exchange
must meet the minimum purchase requirements of the fund into
which you are exchanging. You may have to pay a sales charge
when exchanging shares that you purchased without a sales
charge for shares that are sold with a sales charge. Please
consult the Statement of Additional Information for details.
The fund may change or cancel its exchange policy at any time
upon 60 days' notice. Because an exchange is treated for tax
purposes as a purchase and sale, and any gain may be subject
to tax, you should consult your tax adviser about the tax
consequences of exchanging your shares.
Fund Direct/SM/
The Fund Direct Program allows you to link your fund account
to your bank account, transfer money electronically between
these accounts, and perform a variety of account
transactions, including purchasing shares by telephone and
investing through a systematic investment plan. You also may
have dividends, distributions, redemption payments or
systematic withdrawal plan payments sent directly to your
bank account. Your financial adviser can help you complete
the forms for these services, or you can call Nuveen at (800)
257-8787 for copies of the necessary forms.
Section 3 How You Can Buy and Sell Shares 9
<PAGE>
How to Sell Shares
You may sell (redeem) your shares on any business day. You
will receive the share price next determined after the fund
has received your properly completed redemption request. If
you are selling shares purchased recently with a check, you
will not receive your redemption proceeds until your check
has cleared. This may take up to ten days from your purchase
date.
Through Your Financial Adviser
You may sell your shares through your financial adviser who
can prepare the necessary documentation. Your adviser may
charge you for this service.
By Telephone
If you have authorized telephone redemption privileges, you
can redeem your shares by calling (800) 257-8787. Telephone
redemptions are not available if you own shares in
certificate form and may not exceed $50,000. Checks will only
be issued to you as the shareholder of record and mailed to
your address of record. If you have established Fund Direct
privileges, you may have redemption proceeds transferred
electronically to your bank account. We will normally mail
your check the next business day.
By Check
You may request that the fund provides you with redemption
checks. These checks may be made payable to any person in the
amount of $500 or more. Simply fill out the appropriate
section of the application form and submit the enclosed
signature card. You must have enough shares in your account
to cover the amount of each check you write or it will be
returned. Writing checks from your fund account does not mean
that your account is like a bank checking account. This check
redemption privilege may be modified or terminated at any
time.
By Mail
You can sell your shares at any time by sending a written
request to the fund, c/o Nuveen Investor Services, P.O. Box
5186, Bowling Green Station, New York, NY 10274-5186. Your
redemption request must include the following information:
. The fund's name;
. Your name and account number;
. The dollar or share amount you wish to redeem;
. The signature of each owner exactly as it appears on the
account;
. The name of the person to whom you want your redemption
proceeds paid (if other than to the shareholder of record);
. The address where you want your redemption proceeds sent
(if other than the address of record); and
. Any required signature guarantees (see below).
The fund will normally mail your check the next business day
after it receives your redemption request, but in no event
more than seven days after the fund receives your request. If
you purchased your shares by check, your redemption proceeds
will not be mailed until your check has cleared. This may
take up to ten days from your purchase date.
An Important Note About Telephone Transactions
Although Nuveen Investor Services has certain safeguards and procedures to
confirm the identity of callers, it will not be liable for losses resulting from
following telephone instructions it reasonably believes to be genuine. Also, you
should verify your trade confirmations immediately upon receipt.
10 Section 3 How You Can Buy and Sell Shares
<PAGE>
Signature Guarantees
Signature guarantees are required if you are redeeming more
than $50,000, you want the check payable to someone other
than the shareholder of record, you want the check sent to
another address, or if the address on the fund's records has
been changed within the last 60 days. Signature guarantees
must be obtained from a bank, brokerage firm or other
financial intermediary that is a member of an approved
Medallion Guarantee Program or that is otherwise approved by
the fund. A notary public cannot provide a signature
guarantee.
Systematic Withdrawal
If the value of your fund account is at least $10,000, you
may participate in the fund's systematic withdrawal plan. The
plan allows you to make regular withdrawals through automatic
deductions from your fund account. The minimum automatic
withdrawal is $50 per month. You may elect to receive
payments monthly, quarterly, semi-annually or annually, and
may choose to receive a check, or have the monies transferred
directly to your bank account (see "Special Services -- Fund
Direct" above), paid to a third party or sent payable to you
at an address other than the address on the fund's records.
To participate in the systematic withdrawal plan, simply
complete the appropriate section of the account application
or submit an account update form.
Redemptions In-Kind
The fund generally pays redemption proceeds in cash. Under
unusual conditions that make cash payment unwise and for the
protection of existing shareholders, the fund may pay all or
a portion of your redemption proceeds in securities or other
fund assets. Although it is unlikely that your shares would
be redeemed in-kind, you would probably have to pay brokerage
costs to sell the securities distributed to you, as well as
taxes on any capital gains from that sale.
An Important Note About Involuntary Redemption
From time to time, the fund may establish minimum account size requirements. The
fund reserves the right to liquidate your account upon 30 days' written notice
if the value of your account falls below an established minimum. The fund
presently has set a minimum account balance of $100 unless you have an active
Nuveen Defined Portfolio reinvestment account.
Section 3 How You Can Buy and Sell Shares 11
<PAGE>
Section 4 General Information
To help you understand the tax implications of investing in
the fund, this section includes important details about how
the fund makes distributions to shareholders. We discuss some
other fund policies, as well.
Dividends, Distributions and Taxes
The fund pays tax-free dividends monthly. In the very
unlikely event that the fund realizes capital gains or
ordinary income subject to regular federal income tax, it
will pay any capital gains or other taxable distributions
annually. The fund declares dividends on each business day to
shareholders of record on that day.
Payment and Reinvestment Options
The fund automatically reinvests your dividends in additional
fund shares unless you request otherwise. You may request to
have your dividends paid to you by check, deposited directly
into your bank account, paid to a third party, sent to an
address other than the address on the fund's records, or
reinvested in shares of another Nuveen mutual fund. For more
information, contact your financial adviser or call Nuveen at
(800) 257-8787.
Taxes and Tax Reporting
Because the fund invests in municipal money market
securities, your regular monthly dividends will be exempt
from regular federal income tax. A portion of these
dividends, however, may be subject to state and local taxes
or the federal alternative minimum tax.
Although very unlikely, the fund may, from time to time,
distribute taxable ordinary income or capital gains. Capital
gains are taxable to shareholders either as ordinary income
or as long-term capital gains, depending on how long the fund
owned the investment.
Early in each year, you will receive a statement detailing
the amount and nature of all dividends and capital gains that
you were paid during the prior year. If you hold your
investment at the firm where you purchased your fund shares,
you will receive the statement from that firm. If you hold
your shares directly at the fund, Nuveen will send you the
statement. The tax status of your dividends is the same
whether you reinvest your dividends or elect to receive them
in cash.
If you receive social security or railroad retirement
benefits, you should consult your tax adviser about how an
investment in the fund may affect the federal taxation of
your benefits.
Please note that if you do not furnish the fund with your
correct Social Security number or employer identification
number, federal law requires the fund to withhold federal
income tax from your distributions and redemption proceeds,
currently at a rate of 31%.
12 Section 4 General Information
<PAGE>
Please consult the Statement of Additional Information and your tax adviser for
more information about taxes.
Taxable Equivalent Yields
The taxable equivalent yield is the current yield you would need to earn on a
taxable investment in order to equal a stated tax-free yield on a municipal
investment. To assist you to more easily compare municipal investments like the
funds with taxable alternative investments, the table below presents the taxable
equivalent yields for a range of hypothetical tax-free yields and tax rates.
Taxable Equivalent Yield
- --------------------------------------------------------------------------------
Tax-Exempt Yields
<TABLE>
<S> <C> <C> <C> <C> <C>
Federal Tax Rates 2.00% 2.50% 3.00% 3.50% 4.00%
28.0% 2.78% 3.47% 4.17% 4.86% 5.56%
31.0% 2.90% 3.62% 4.35% 5.07% 5.80%
36.0% 3.13% 3.91% 4.69% 5.47% 6.25%
39.6% 3.31% 4.14% 4.97% 5.79% 6.62%
</TABLE>
The yields and tax rates shown above are hypothetical and do not predict your
actual returns or effective tax rate. For more detailed information, see the
Statement of Additional Information or consult your tax adviser.
Service Plan
Nuveen serves as the selling agent and distributor of the fund's shares. In this
capacity, Nuveen manages the offering of the fund's shares and is responsible
for all sales and promotional activities, and for providing certain services to
shareholders. The fund has adopted a service plan in accordance with Rule 12b-1
under the Investment Company Act of 1940 to reimburse Nuveen for these services.
Nuveen uses the service fee paid under the plan to compensate authorized
dealers, including Nuveen, for providing on-going account services to
shareholders. These services may include establishing and maintaining your
account, answering your questions and providing other personal services to you.
Because these fees are paid out of the fund's assets on an on-going basis, over
time these fees will increase the cost of your investment. Nuveen may, in its
discretion and from its own resources, pay certain financial service firms
additional amounts for services rendered to shareholders.
Service fees under the plan are paid in accordance with the following schedule:
<TABLE>
<CAPTION>
Average Daily Net Assets
of Serviced Accounts Fee
- --------------------------------------------------------------------------------
<S> <C>
Less than $2 million .10%
$2 million to $5 million .15%
$5 million to $10 million .20%
$10 million and over .25%
</TABLE>
Section 4 General Information 13
<PAGE>
Net Asset Value
The price you pay and receive for your shares is based on the
fund's net asset value per share, which is determined at
12:00 noon Eastern Time on each business day. Because the
fund seeks to maintain a constant price per share of $1.00,
the fund values its portfolio securities using the amortized
cost method, which approximates market value and is described
in more detail in the Statement of Additional Information.
There can be no assurance that the fund will be able to
maintain a constant price per share of $1.00.
Fund Service Providers
The custodian of the fund's assets is The Chase Manhattan
Bank, 4 New York Plaza, New York, NY 10004-2413. Chase also
provides certain accounting services to the fund. The fund's
transfer, shareholder services and dividend paying agent,
Chase Global Funds Services Company, P.O. Box 5186, New York,
NY 10274-5186, performs bookkeeping, data processing and
administrative services for the maintenance of shareholder
accounts.
Year 2000
The fund's service providers rely on computer systems to
manage the fund's investments, process shareholder
transactions and provide shareholder account maintenance.
Because of the way computers historically have stored dates,
some of these systems currently may not be able to correctly
process activity occurring in the year 2000. Nuveen is
working with the fund's service providers to adapt their
systems to address this issue. Nuveen and the fund expect
that the necessary work will be completed on a timely basis,
although there can be no assurance of this.
14 Section 4 General Information
<PAGE>
Section 5 Financial Highlights
Section 5 Financial Highlights 15
<PAGE>
Nuveen Mutual Funds
Nuveen offers a variety of mutual funds designed to help you
reach your financial goals. The funds below are grouped by
investment objectives.
Growth
Nuveen Rittenhouse Growth Fund
Growth and Income
Growth and Income Stock Fund
Balanced Stock and Bond Fund
Balanced Municipal and Stock Fund
Dividend and Growth Fund
European Value Fund
Income
Income Fund
Tax-Free Income
National Municipal Bond Funds
Long-term Intermediate-term
Insured Long-term Limited-term
<TABLE>
<CAPTION>
State Municipal Bond Funds
<S> <C> <C>
Arizona Louisiana North Carolina
California1/1/ Maryland Ohio
Colorado Massachusetts/1/ Pennsylvania
Connecticut Michigan Tennessee
Florida Missouri Virginia
Georgia New Jersey Wisconsin
Kansas New Mexico
Kentucky New York/1/
</TABLE>
Cash Reserves
Money Market Fund
Municipal Money Market Fund
California Tax-Exempt Money Market Fund
New York Tax-Exempt Money Market Fund
Several additional sources of information are available to
you. The Statement of Additional Information, incorporated by
reference into this prospectus, contains detailed information
on fund policies and operations. Shareholder reports contain
management's discussion of market conditions, investment
strategies and performance results as of the fund's latest
semi-annual or annual fiscal year end. Call Nuveen at (800)
257-8787 to request a free copy of any of these materials or
other fund information, or ask your financial adviser for
copies.
You also may obtain this and other fund information directly
from the Securities and Exchange Commission (SEC). The SEC
may charge a copying fee for this information. Visit the SEC
on-line at http://www.sec.gov or in person at the SEC's
Public Reference Room in Washington, D.C. Call the SEC at
(800) SEC-0330 for room hours and operation. You also may
request fund information by writing to the SEC's Public
Reference Section, Washington, D.C. 20549. The fund's
Investment Company Act file number is 811-03531.
1. Long-term and insured long-term portfolios.
NUVEEN
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
MMPR-MM 4-99
(800) 257-8787
www.nuveen.com
<PAGE>
PART B--STATEMENT OF ADDITIONAL INFORMATION
NUVEEN TAX-FREE RESERVES, INC.
333 West Wacker Drive
Chicago, Illinois 60606
<PAGE>
Statement of Additional Information
June 25, 1999
Nuveen Municipal Money Market Fund, Inc.
333 West Wacker Drive
Chicago, Illinois 60606
NUVEEN MUNICIPAL MONEY MARKET FUND
This Statement of Additional Information is not a prospectus. This Statement of
Additional Information should be read in conjunction with the Prospectus of the
Nuveen Municipal Money Market Fund dated June 25, 1999. The Prospectus may be
obtained without charge from certain securities representatives, banks, and
other financial institutions that have entered into sales agreements with John
Nuveen & Co. Incorporated, or from the Fund by mailing a written request to the
Fund, c/o John Nuveen & Co. Incorporated ("Nuveen"), 333 West Wacker Drive,
Chicago, Illinois 60606 or by calling (800) 257-8787.
<TABLE>
<S> <C>
Table of Contents Page
- ------------------------------------------------------------
Investment Policies and Investment Portfolio S-2
- ------------------------------------------------------------
Management S-11
- ------------------------------------------------------------
Investment Adviser and Investment Management Agreement S-15
- ------------------------------------------------------------
Portfolio Transactions S-16
- ------------------------------------------------------------
Net Asset Value S-17
- ------------------------------------------------------------
Tax Matters S-19
- ------------------------------------------------------------
Performance Information S-22
- ------------------------------------------------------------
Additional Information About Purchases and Sales S-25
- ------------------------------------------------------------
Service Plan S-28
- ------------------------------------------------------------
Other Information Regarding Shares of the Fund S-30
- ------------------------------------------------------------
</TABLE>
Principal Underwriter Investment Adviser Independent Public Accountants
John Nuveen & Co. Incorporated
Nuveen Advisory for the Fund
Corp., Subsidiary
of John Nuveen &
Co. Incorporated
Arthur Andersen LLP
Chicago: 33 West Monroe Street
333 West Wacker Drive Chicago, Illinois 60603
Chicago, Illinois 60606 333 West Wacker
Drive
(312) 917-7700
Chicago, Illinois
60606
Transfer and Dividend
New York: Disbursing Agent
10 East 50th Street Chase Global Funds
New York, New York 10022Custodian Services Company
(212) 207-2000 The Chase Manhattan P.O. Box 5186
Bank New York, New York 10274
4 New York Plaza
New York, New York
10004
<PAGE>
FUNDAMENTAL POLICIES AND INVESTMENT PORTFOLIO
Fundamental Policies
The Fund's investment objective and certain fundamental policies are described
in the Prospectus. The Fund, as a fundamental policy, may not, without the ap-
proval of the holders of a majority of the shares:
(1) Invest in securities other than Municipal Obligations and temporary in-
vestments as those terms are defined in the Prospectus;
(2) Invest more than 5% of its total assets in securities of any one issuer,
excluding the United States government, its agencies and instrumentalities;
(3) Borrow money, except for temporary or emergency purposes and not for in-
vestment purposes and then only in an amount not exceeding (a) 10% of the
value of the Fund's total assets at the time of borrowing or (b) one-third of
the value of the Fund's total assets including the amount borrowed in order to
meet redemption requests which might otherwise require the untimely disposi-
tion of securities. While any such borrowings exceed 5% of total assets, no
additional purchases of investment securities will be made by the Fund. If due
to market fluctuations or other reasons the value of the Fund's assets fall
below 300% of its borrowings, the Fund will reduce its borrowings within 3
business days. To do this, the Fund may have to sell a portion of its invest-
ments at a time when it may be disadvantageous to do so;
(4) Pledge, mortgage or hypothecate its assets, except that, to secure
borrowings permitted by subparagraph (3) above, it may pledge securities hav-
ing a market value at the time of pledge not exceeding 10% of the value of the
Fund's total assets;
(5) Issue senior securities as defined in the Investment Company Act of 1940
except to the extent such issuance might be involved with respect to
borrowings described under item (3) above;
(6) Underwrite any issue of securities, except to the extent that the purchase
of Municipal Obligations in accordance with the Fund's investment objective,
policies, and limitations, may be deemed to be an underwriting;
(7) Purchase or sell real estate, but this shall not prevent the Fund from in-
vesting in Municipal Obligations secured by real estate or interests therein
or foreclosing upon and selling such security;
(8) Purchase or sell commodities or commodities contracts or oil, gas or other
mineral exploration or development programs;
(9) Make loans, other than by entering into repurchase agreements and through
the purchase of Municipal Obligations or temporary investments in accordance
with its investment objective, policies and limitations;
(10) Make short sales of securities or purchase any securities on margin, ex-
cept for such short-term credits as are necessary for the clearance of trans-
actions;
(11) Write or purchase put or call options, except to the extent that the pur-
chase of a stand-by commitment may be considered the purchase of a put;
S-2
<PAGE>
(12) Concentrate more than 25% of its assets in the securities of issuers in
any single industry; provided, however, that such limitations shall not be ap-
plicable on the purchase of Municipal Obligations issued by governments or po-
litical subdivisions of governments, and obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities;
(13) Invest more than 10% of its assets in repurchase agreements maturing in
more than seven days, "illiquid" securities (such as non-negotiable CDs) and
securities without readily available market quotations.
For the purpose of applying the limitations set forth in paragraph (2) above,
the issuer shall be deemed a separate issuer when its assets and revenues are
separate from other governmental entities and its securities are backed only
by its assets and revenues. Similarly, in the case of a non-governmental user,
such as an industrial corporation or a privately owned or operated hospital,
if the security is backed only by the assets and revenues of the non-govern-
mental user then such non-governmental user would be deemed to be the sole is-
suer. Where a security is also backed by the enforceable obligation of a supe-
rior or unrelated governmental entity or other entity (other than a bond in-
surer) it shall be included in the computation of securities owned that are
issued by such governmental entity or other entity.
Where a security is guaranteed by a governmental entity or some other facili-
ty, such as a bank guarantee or letter of credit, such a guarantee or letter
of credit would be considered a separate security and would be treated as an
issue of such government, other entity or bank. Where a security is insured by
bond insurance, it shall not be considered a security issued or guaranteed by
the insurer; instead the issuer of such security will be determined in accor-
dance with the principles set forth above. The foregoing restrictions do not
limit the percentage of the Fund's assets that may be invested in securities
insured by any single insurer. It is a fundamental policy of the Fund, which
cannot be changed without the approval of the holders of a majority of shares
of such Fund, that the Fund will not hold securities of a single bank, includ-
ing securities backed by a letter of credit of such bank, if such holdings
would exceed 10% of the total assets of the Fund.
The foregoing restrictions and limitations, as well as the Fund's policies as
to ratings of fund investments, will apply only at the time of purchase of se-
curities, and the percentage limitations will not be considered violated un-
less an excess or deficiency occurs or exists immediately after and as a re-
sult of an acquisition of securities, unless otherwise indicated.
The foregoing fundamental investment policies, together with the investment
objective of the Fund, cannot be changed without approval by holders of a "ma-
jority of the Fund's outstanding voting shares." As defined in the Investment
Company Act of 1940, this means the vote of (i) 67% or more of the Fund's
shares present at a meeting, if the holders of more than 50% of the Fund's
shares are present or represented by proxy, or (ii) more than 50% of the
Fund's shares, whichever is less.
S-3
<PAGE>
General Information
The Nuveen Municipal Money Market Fund, Inc. (the "Fund") is an open-end diver-
sified management company incorporated as a Maryland corporation on July 6,
1982. It is authorized to issue 2,000,000,000 shares of Common Stock, $.01 par
value. Prior to June 1999, the Fund was called the Nuveen Tax-Free Reserves,
Inc. Fund Shares represent an interest in the same portfolio of investments of
the Fund. Fund Shares have equal rights as to voting, redemption, dividends and
liquidation, and have exclusive voting rights with respect to any applicable
distribution or service plan. There are no conversion, preemptive or other sub-
scription rights. The Board of Directors of the Fund has the right to establish
additional series and classes of shares in the future, to change those series
or classes and to determine the preferences, voting powers, rights and privi-
leges thereof.
Year 2000 Issues
The "Year 2000" problem refers to the fact that many computer programs use only
the last two digits of a year, and do not recognize a year that begins with
"20" instead of "19." If this problem is not corrected, computers could func-
tion improperly or not at all, which could affect the global economy. The SEC
has urged securities issuers to disclose the steps they are taking to correct
any Year 2000 problems.
The Fund invests primarily in money market instruments. If the issuers of these
instruments do not correct any Year 2000 problems in a timely manner, they
could experience problems in conducting their operations or in making payments
on their securities, which could cause the value of these securities to de-
cline. Issuers could experience three types of Year 2000 problems. First, if an
issuer's internal computer systems experience Year 2000 problems, this could
disrupt an issuer's operations (such as its ability to collect local taxes or
fees). Second, an issuer may rely on other parties for the payments that sup-
port its debt service, such as servicers that collect mortgage or student loan
payments, and those third parties may have Year 2000 problems that interfere
with their ability to forward payments to the issuer. Third, an issuer may have
mechanical problems in sending payments to its securities holders.
Nuveen Advisory is obtaining information about the Year 2000 readiness of the
issuers of its portfolio securities as part of its on-going surveillance of the
creditworthiness of those issuers.
Portfolio Securities
The various securities in which the Fund intends to invest are described in the
Prospectus. The following is a more complete description of certain Municipal
Obligations in which the Fund may invest:
Municipal Obligations
The Fund invests in debt obligations issued by states, cities and local author-
ities to obtain funds for various public purposes, including the construction
of such public facilities as airports, bridges, highways, housing, hospitals,
mass transportation, schools, streets and water and sewer works. Other public
purposes for which these securities may be issued include the refinancing of
outstanding obligations, the obtaining of funds for general operating expenses
and for loans to other public institutions and facilities. In addition, certain
industrial development bonds and pollution control bonds may be in-
S-4
<PAGE>
cluded within the term Municipal Obligations if the interest paid thereon qual-
ifies as exempt from federal income tax.
Two principal classifications of these securities (sometimes called Municipal
Obligations) are "general obligation" and "revenue" bonds. General obligation
bonds are secured by the issuer's pledge of its full faith, credit and taxing
power for the payment of principal and interest. Revenue bonds are payable only
from the revenues derived from a particular facility or class of facilities or,
in some cases, from the proceeds of a special excise or other specific revenue
source. Industrial development and pollution control bonds are in most cases
revenue bonds and do not generally constitute the pledge of the credit or tax-
ing power of the issuer of such bonds.
Municipal Obligations can be further classified between bonds and notes. Bonds
are issued to raise longer-term capital but, when purchased by the Fund, will
have 397 days or less remaining until maturity or will have a variable or
floating rate of interest. These issues may be either general obligation bonds
or revenue bonds.
Notes are short-term instruments with a maturity of two years or less. Most
notes are general obligations of the issuer and are sold in anticipation of a
bond sale, collection of taxes or receipt of other revenues. Payment of these
notes is primarily dependent upon the issuer's receipt of the anticipated reve-
nues.
Municipal Obligations also include very short-term unsecured, negotiable prom-
issory notes, issued by states, municipalities, and their agencies, which are
known as "tax-exempt commercial paper" or "municipal paper." Payment of princi-
pal and interest on issues of municipal paper may be made from various sources,
to the extent that funds are available therefrom. There is a limited secondary
market for issues of municipal paper.
While these various types of notes as a group represent the major portion of
the tax-exempt note market, other types of notes are occasionally available in
the marketplace and the Fund may invest in such other types of notes to the ex-
tent consistent with its investment objective and limitations. Such notes may
be issued for different purposes and with different security than those men-
tioned above.
The yields on Municipal Obligations are dependent on a variety of factors, in-
cluding the condition of the general money market and the Municipal Obligation
market, the size of a particular offering, the maturity of the obligation and
the rating of the issue. The ratings of Moody's and S&P represent their opin-
ions as to the quality of those Municipal Obligations which they undertake to
rate. It should be emphasized, however, that ratings are general and are not
absolute standards of quality. Consequently, Municipal Obligations with the
same maturity, coupon and rating may have different yields while obligations of
the same maturity and coupon with different ratings may have the same yield.
The market value of outstanding Municipal Obligations will vary with changes in
prevailing interest rate levels and as a result of changing evaluations of the
ability of their issuers to meet interest and principal payments.
S-5
<PAGE>
Obligations of issuers of debt securities are subject to the provisions of
bankruptcy, insolvency and other laws affecting the rights and remedies of
creditors. In addition, the obligations of such issuers may become subject to
laws enacted in the future by Congress, state legislatures or referenda ex-
tending the time for payment of principal and/or interest, or imposing other
constraints upon enforcement of such obligations or upon municipalities to levy
taxes. There is also the possibility that, as a result of legislation or other
conditions, the power or ability of any issuer to pay, when due, the principal
of and interest on its debt security may be materially affected.
Bond Anticipation Notes (BANs) are usually general obligations of state and lo-
cal governmental issuers which are sold to obtain interim financing for pro-
jects that will eventually be funded through the sale of long-term debt obliga-
tions or bonds. The ability of an issuer to meet its obligations on its BANs is
primarily dependent on the issuer's access to the long-term municipal bond mar-
ket and the likelihood that the proceeds of such bond sales will be used to pay
the principal and interest on the BANs.
Tax Anticipation Notes (TANs) are issued by state and local governments to fi-
nance the current operations of such governments. Repayment is generally to be
derived from specific future tax revenues. TANs are usually general obligations
of the issuer. A weakness in an issuer's capacity to raise taxes due to, among
other things, a decline in its tax base or a rise in delinquencies, could ad-
versely affect the issuer's ability to meet its obligations on outstanding
TANs.
Revenue Anticipation Notes (RANs) are issued by governments or governmental
bodies with the expectation that future revenues from a designated source will
be used to repay the notes. In general they also constitute general obligations
of the issuer. A decline in the receipt of projected revenues, such as antici-
pated revenues from another level of government, could adversely affect an is-
suer's ability to meet its obligations on outstanding RANs. In addition, the
possibility that the revenues would, when received, be used to meet other obli-
gations could affect the ability of the issuer to pay the principal and inter-
est on RANs.
Construction Loan Notes are issued to provide construction financing for spe-
cific projects. Frequently, these notes are redeemed with funds obtained from
the Federal Housing Administration.
Bank Notes are notes issued by local governmental bodies and agencies such as
those described above to commercial banks as evidence of borrowings. The pur-
poses for which the notes are issued are varied but they are frequently issued
to meet short-term working-capital or capital-project needs. These notes may
have risks similar to the risks associated with TANs and RANs.
Industrial Development and Pollution Control Bonds are issued by or on behalf
of public authorities to finance various privately-rated facilities. Typically
the interest paid thereon is exempt from federal income tax.
Variable and Floating Rate Instruments. Certain money market instruments may
carry variable or floating rates of interest. Such instruments bear interest at
rates which are not fixed, but which vary with changes in specified market
rates or indices, such as a bank prime rate or tax-exempt money market index.
Variable rate notes are adjusted to current interest rate levels at certain
specified times, such as every 30 days, as set forth in the instrument. A
floating rate note adjusts automatically whenever there is a change in its base
interest rate adjustor, e.g., a change in the prime lending rate or specified
interest rate indices. Typically such instruments carry demand features permit-
ting the Fund to recover the full principal amount thereof upon specified
notice.
S-6
<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.
S-7
<PAGE>
When-Issued Securities
The Fund may purchase and sell Municipal Obligations on a when-issued or de-
layed delivery basis. When-issued and delayed delivery transactions arise when
securities are purchased or sold with payment and delivery beyond the regular
settlement date. (When-issued transactions normally settle within 30-45 days.)
On such transactions the payment obligation and the interest rate are fixed at
the time the buyer enters into the commitment. The commitment to purchase secu-
rities on a when-issued or delayed delivery basis may involve an element of
risk because the value of the securities is subject to market fluctuation, no
interest accrues to the purchaser prior to settlement of the transaction, and
at the time of delivery the market value may be less than cost. At the time the
Fund makes the commitment to purchase a Municipal Obligation on a when-issued
or delayed delivery basis, it will record the transaction and reflect the
amount due and the value of the security in determining its net asset value.
Likewise, at the time the Fund makes the commitment to sell a Municipal Obliga-
tion on a delayed delivery basis, it will record the transaction and include
the proceeds to be received in determining its net asset value; accordingly,
any fluctuations in the value of the Municipal Obligation sold pursuant to a
delayed delivery commitment are ignored in calculating net asset value so long
as the commitment remains in effect. The Fund will maintain designated readily
marketable assets at least equal in value to commitments to purchase when-is-
sued or delayed delivery securities, such assets to be segregated by the Custo-
dian specifically for the settlement of such commitments. The Fund will only
make commitments to purchase Municipal Obligations on a when-issued or delayed
delivery basis with the intention of actually acquiring the securities, but the
Fund reserves the right to sell these securities before the settlement date if
it is deemed advisable. If a when-issued security is sold before delivery any
gain or loss would not be tax-exempt.
Taxable Investments
Taxable investments (sometimes called "Temporary Investments") include obliga-
tions of the United States Government, its agencies or instrumentalities; debt
securities of issuers having, at the time of purchase, a quality rating within
the two highest grades by either Moody's Investors Service, Inc. ("Moody's") or
Standard & Poor's Corporation ("S&P") (Aaa or Aa, or AAA or AA, respectively);
commercial paper rated in the highest grade by either of such rating services
(Prime-1 or A-1, respectively); certificates of deposit of domestic banks with
assets of $1 billion or more; and Municipal Obligations and U.S. Government ob-
ligations subject to short-term repurchase agreements.
Subject to the limitations described in the Prospectus the Fund may invest in
the following taxable investments:
U.S. Government Direct Obligations--issued by the United States Treasury and
include bills, notes, and bonds.
- --Treasury bills are issued with maturities of up to one year. They are issued
in bearer form, are sold on a discount basis and are payable at par value at
maturity.
- --Treasury notes are longer-term interest-bearing obligations with original ma-
turities of one to seven years.
S-8
<PAGE>
- --Treasury bonds are longer-term interest-bearing obligations with original ma-
turities from five to thirty years.
U.S. Government Agencies Securities--Certain federal agencies have been estab-
lished as instrumentalities of the United States government to supervise and
finance certain types of activities. These agencies include, but are not lim-
ited to the Bank for Cooperatives, Federal Land Banks, Federal Intermediate
Credit Banks, Federal Home Loan Banks, Federal National Mortgage Association,
Government National Mortgage Association, Export-Import Bank of the United
States and Tennessee Valley Authority. Issues of these agencies, while not di-
rect obligations of the United States government, are either backed by the full
faith and credit of the United States or are guaranteed by the Treasury or sup-
ported by the issuing agencies' right to borrow from the Treasury. There can be
no assurance that the United States government itself will pay interest and
principal on securities as to which it is not so legally obligated.
Certificates of Deposit (CDs)--A certificate of deposit is a negotiable inter-
est-bearing instrument with a specific maturity. CDs are issued by banks in ex-
change for the deposit of funds and normally can be traded in the secondary
market, prior to maturity. The Fund will only invest in U.S. dollar denominated
CDs issued by U.S. banks with assets of $1 billion or more.
Commercial Paper--Commercial paper is the term used to designate unsecured
short-term promissory notes issued by corporations. Maturities on these issues
vary from a few to 397 days. Commercial paper may be purchased from U.S. corpo-
rations.
Other Corporate Obligations--The Fund may purchase notes, bonds and debentures
issued by corporations if at the time of purchase there is less than 397 days
remaining until maturity or if they carry a variable or floating rate of inter-
est.
Repurchase Agreements--A repurchase agreement is a contractual agreement
whereby the seller of securities (U.S. Government or Municipal Obligations)
agrees to repurchase the same security at a specified price on a future date
agreed upon by the parties. The agreed upon repurchase price determines the
yield during the Fund's holding period. Repurchase agreements are considered to
be loans collateralized by the underlying security that is the subject of the
repurchase contract. The Fund will only enter into repurchase agreements with
dealers, domestic banks or recognized financial institutions that in the opin-
ion of Nuveen Advisory represent minimal credit risk. The risk to the Fund is
limited to the ability of the issuer to pay the agreed upon repurchase price on
the delivery date; however, although the value of the underlying collateral at
the time the transaction is entered into always equals or exceeds the agreed
upon repurchase price, if the value of the collateral declines there is a risk
of loss of both principal and interest. In the event of default, the collateral
may be sold but the Fund might incur a loss if the value of the collateral de-
clines, and might incur disposition costs or experience delays in connection
with liquidating the collateral. In addition, if bankruptcy proceedings are
commenced with respect to the seller of the security, realization upon the col-
lateral by the Fund may be delayed or limited. Nuveen Advisory will monitor the
value of the collateral at the time the transaction is entered into and at all
times subsequent during the term of the repurchase agreement in an effort to
determine that the value always equals or exceeds the agreed upon repurchase
price. In the event the value of the collateral declines below the repurchase
price, Nuveen Advisory will demand additional collateral from the issuer to in-
crease the value of the collateral to at least that of the repurchase price.
S-9
<PAGE>
Variable and Floating Rate Instruments--See description on page 6.
Ratings of Investments
The two highest ratings of Moody's for Municipal Obligations are Aaa and Aa.
Municipal Obligations rated Aaa are judged to be of the "best quality." The
rating of Aa is assigned to Municipal Obligations which are of "high quality by
all standards," but as to which margins of protection or other elements make
long-term risks appear somewhat larger than in Aaa rated Municipal Obligations.
The Aaa and Aa rated Municipal Obligations comprise what are generally known as
"high grade bonds." Moody's bond rating symbols may contain numerical modifiers
of a generic rating classification. The modifier 1 indicates that the bond
ranks at the high end of its category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates that the issue ranks in the lower end of
its generic rating category.
The two highest ratings of S&P for Municipal Obligations are AAA and AA. Munic-
ipal Obligations rated AAA have an extremely strong capacity to pay principal
and interest. The rating of AA indicates that capacity to pay principal and in-
terest is very strong and such bonds differ from AAA issues only in small de-
gree.
The highest rating of Moody's and S&P for federally tax-exempt short-term loans
and notes is VMIG-1 or MIG-I and SP-1, respectively. Obligations designated
VMIG-I and MIG-I are the best quality, enjoying strong protection from estab-
lished cash flows for their servicing or from established and broad-based ac-
cess to the market for refinancing, or both. The designation SP-1 indicates a
very strong or strong capacity to pay principal and interest.
The Fund's ability to purchase commercial paper of tax-exempt and corporate is-
suers is limited to commercial paper rated Prime-1 by Moody's or A-1 by S&P.
The rating Prime-1 (P-1) is the highest commercial paper rating assigned by
Moody's. Issuer's rated P-1 have a superior capacity for repayment of short-
term obligations normally evidenced by the following characteristics: leading
market positions in well-established industries; high rates of return on funds
employed; conservative capitalization structures which moderate reliance on
debt and ample asset protection; broad margins in earnings coverage of fixed
financial charges and high internal cash generation; well-established access to
a range of financial markets and assured sources of alternative liquidity. The
designation A-1 indicates that the degree of safety regarding timely payment is
very strong.
Subsequent to its purchase by the Fund, an issue may cease to be rated or its
rating may be reduced below the minimum required for purchase by the Fund. Nei-
ther event requires the elimination of such obligations from the Fund, but
Nuveen Advisory will consider such an event in its determination of whether the
Fund should continue to hold such obligation.
S-10
<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 seven directors of the Fund,
one of whom is an "interested person" (as that term is defined in the Invest-
ment Company Act of 1940). The names and business addresses of the directors
and officers of the Fund and their ages and principal occupations and other af-
filiations during the past five years are set forth below.
<TABLE>
- --------------------------------------------------------------------------------
<CAPTION>
Positions and Principal Occupations
Name and Address Age Offices with Funds During Past Five Years
- --------------------------------------------------------------------------------
<C> <C> <C> <S>
Timothy R. Schwertfeger*+ 50 Chairman of the Board Chairman of the Board of
333 West Wacker Drive and Director the Funds (since July
Chicago, IL 60606 1996); Trustee and
President of the Funds
advised by Nuveen
Institutional Advisory
Corp. (since July 1996);
Chairman (since July
1996), Director, and
previously Executive
Vice President, of The
John Nuveen Company,
John Nuveen & Co.,
Nuveen Advisory Corp.
and Nuveen Institutional
Advisory Corp.; Director
(since 1996) of
Institutional Capital
Corporation; Chairman
and Director of Nuveen
Asset Management, Inc.;
Chairman and Director of
Rittenhouse Financial
Services Inc. (since
1999).
- --------------------------------------------------------------------------------
Robert P. Bremner 58 Director Private Investor and
3725 Huntington Street, N.W. Management Consultant.
Washington, D.C. 20015
- --------------------------------------------------------------------------------
Lawrence H. Brown 64 Director Retired (August 1989) as
201 Michigan Avenue Senior Vice President of
Highwood, IL 60040 The Northern Trust
Company (banking and
trust industry).
- --------------------------------------------------------------------------------
Anne E. Impellizzeri 66 Director Executive Director
3 West 29th Street (since 1998) of Manitoga
New York, NY 10001 (center for Russell
Wright's design/home and
landscape); formerly
President and Chief
Executive Officer of
Blanton-Peale,
Institutes of Religion
and Health (a training
and counseling
organization).
- --------------------------------------------------------------------------------
Peter R. Sawers 66 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;
Chartered Financial
Analyst; Certified
Management Consultant.
- --------------------------------------------------------------------------------
William J. Schneider 54 Director Senior Partner and Chief
4000 Miller-Valentine Ct. Operating Officer,
P.O. Box 744 Miller-Valentine
Dayton, OH 45401 Partners, Vice
President, Miller-
Valentine Group
(commercial real
estate); Member
Community Advisory
Board, National City
Bank, Dayton, Ohio.
</TABLE>
- --------------------------------------------------------------------------------
S-11
<PAGE>
<TABLE>
- ---------------------------------------------------------------------------------------
<CAPTION>
Positions and Principal Occupations
Name and Address Age Offices with Funds During Past Five Years
- ---------------------------------------------------------------------------------------
<C> <C> <C> <S>
Judith M. Stockdale 51 Director Executive Director,
35 E. Wacker Drive Gaylord and Dorothy
Suite 2600 Donnelley Foundation, a
Chicago, IL 60601 private family
foundation (since 1994);
prior thereto, Executive
Director, Great Lakes
Protection Fund (from
1990 to 1994).
- --------------------------------------------------------------------------------
Alan G. Berkshire+ 38 Vice President and Asst. Secretary Vice President and
333 West Wacker Drive since 1998 General Counsel (since
Chicago, IL 60606 September 1997) and
Secretary (since May
1998) of The John Nuveen
Company, John Nuveen &
Co. Incorporated, Nuveen
Advisory Corp. and
Nuveen Institutional
Advisory Corp.; prior
thereto, partner in the
law firm of Kirkland &
Ellis.
- --------------------------------------------------------------------------------
Peter H. D'Arrigo 31 Vice President and Treasurer Vice President of John
333 West Wacker Drive since 1999 Nuveen & Co.
Chicago, IL 60606 Incorporated (since
January 1999), prior
thereto. Assistant Vice
President (from January
1997); formerly,
Associate of John Nuveen
& Co. Incorporated;
Chartered Financial
Analyst.
- --------------------------------------------------------------------------------
Michael S. Davern+ 41 Vice President since 1997 Vice President of Nuveen
333 West Wacker Drive Advisory Corp. (since
Chicago, IL 60606 January 1997); prior
thereto, Vice President
and Portfolio Manager of
Flagship Financial, Inc.
(from September 1991 to
January 1997).
- ---------------------------------------------------------------------------------------
Lorna C. Ferguson+ 53 Vice President since 1998 Vice President of John
333 West Wacker Drive Nuveen & Co.
Chicago, IL 60606 Incorporated; Vice
President of Nuveen
Advisory Corp. and
Nuveen Institutional
Advisory Corp. (since
January 1998).
- ---------------------------------------------------------------------------------------
William M. Fitzgerald+ 35 Vice President since 1996 Vice President of Nuveen
333 West Wacker Drive Advisory Corp. (since
Chicago, IL 60606 December 1995); prior
thereto, Assistant Vice
President of
Nuveen Advisory Corp.
(from September 1992 to
December 1995);
Chartered Financial
Analyst.
- ---------------------------------------------------------------------------------------
Stephen D. Foy+ 44 Vice President and Controller Vice President of John
333 West Wacker Drive since 1998 Nuveen & Co.
Chicago, IL 60606 Incorporated and (since
May 1998) The John
Nuveen Company;
Certified Public
Accountant.
- --------------------------------------------------------------------------------
J. Thomas Futrell+ 43 Vice President since 1991 Vice President of Nuveen
333 West Wacker Drive Advisory Corp.;
Chicago, IL 60606 Chartered Financial
Analyst.
- ---------------------------------------------------------------------------------------
Richard A. Huber+ 36 Vice President since 1997 Vice President of Nuveen
333 West Wacker Drive Institutional Advisory
Chicago, IL 60606 Corp. (since March 1998)
and Nuveen Advisory
Corp. (since January
1997); prior thereto,
Vice President and
Portfolio Manager of
Flagship Financial, Inc.
- ---------------------------------------------------------------------------------------
Steven J. Krupa+ 41 Vice President since 1990 Vice President of Nuveen
333 West Wacker Drive Advisory Corp.
Chicago, IL 60606
</TABLE>
- --------------------------------------------------------------------------------
S-12
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------
<CAPTION>
Positions and Principal Occupations
Name and Address Age Offices with Funds During Past Five Years
- ------------------------------------------------------------------------------------
<C> <C> <C> <S>
Larry W. Martin+ 47 Vice President since 1993 and Vice President,
333 West Wacker Drive Asst. Secretary since 1998 Assistant Secretary and
Chicago, IL 60606 Assistant General
Counsel of John Nuveen &
Co. Incorporated; Vice
President and Assistant
Secretary of Nuveen
Advisory Corp. and
Nuveen Institutional
Advisory Corp.,
Assistant Secretary of
The John Nuveen Company
and (since January 1997)
Nuveen Asset Management
Inc.
- ------------------------------------------------------------------------------------
Edward F. Neild, IV+ 33 Vice President since 1996 Vice President of Nuveen
333 West Wacker Drive Advisory Corp. and
Chicago, IL 60606 Nuveen Institutional
Advisory Corp. (since
September 1996); prior
thereto, Assistant Vice
President of Nuveen
Advisory Corp. (from
December 1993 to
September 1996) and
Nuveen Institutional
Advisory Corp. (from May
1995 to September 1996);
Chartered Financial
Analyst.
- ------------------------------------------------------------------------------------
Stephen S. Peterson+ 41 Vice President since 1997 Vice President, (since
333 West Wacker Drive September 1997),
Chicago, IL 60606 Assistant Vice President
(from September 1996 to
September 1997), and
Portfolio Manager prior
thereto, of Nuveen
Advisory Corp.;
Chartered Financial
Analyst.
- ------------------------------------------------------------------------------------
Stuart W. Rogers+ 42 Vice President since 1997 Vice President of John
333 West Wacker Drive Nuveen & Co.
Chicago, IL 60606 Incorporated.
- ------------------------------------------------------------------------------------
Thomas C. Spalding, Jr.+ 47 Vice President since 1980 Vice President of Nuveen
333 West Wacker Drive Advisory Corp. and
Chicago, IL 60606 Nuveen Institutional
Advisory Corp.;
Chartered Financial
Analyst.
- ------------------------------------------------------------------------------------
William S. Swanson+ 33 Vice President since 1998 Vice President of John
333 West Wacker Drive Nuveen & Co.
Chicago, IL 60606 Incorporated (since
October 1997); Assistant
Vice President (from
September 1996 to
October 1997) and
formerly, Associate;
Chartered Financial
Analyst.
- ------------------------------------------------------------------------------------
Gifford R. Zimmerman+ 42 Vice President since 1993 and Vice President,
333 West Wacker Drive Secretary since 1998 Assistant Secretary and
Chicago, IL 60606 Associate General
Counsel, formerly
Assistant General
Counsel (since September
1997) of John Nuveen &
Co. Incorporated; Vice
President and Assistant
Secretary of Nuveen
Advisory Corp. and
Nuveen Institutional
Advisory Corp.;
Assistant Secretary of
The John Nuveen Company
(since May 1994);
Chartered Financial
Analyst.
</TABLE>
- --------
*Mr. Schwertfeger is an interested person of the Fund.
+Person is affiliated with the Fund and affiliated with the Fund's adviser or
principal underwriter.
Timothy R. Schwertfeger and Peter R. Sawers serve as members of the Executive
Committee of the Board of Directors. The Executive Committee, which meets be-
tween regular meetings of the Board of Directors, is authorized to exercise all
of the powers of the Board of Directors provided that the scope of the powers
of the Executive Committee, unless otherwise specifically authorized by the
full Board, shall be limited to (i) emergency matters where assembling the full
Board in a timely manner is impracticable (and in which event management would
take all reasonable steps to quickly notify the individual Board members of the
actions taken by the Executive Committee), or (ii) matters of administrative or
restricted nature.
S-13
<PAGE>
The directors of the Fund are directors, or trustees, as the case may be, of 32
Nuveen open-end portfolios and 52 Nuveen closed-end funds.
The following table sets forth compensation paid by the Fund during the fiscal
year ended February 28, 1999 to each of the directors. The Fund has no retire-
ment or pension plans. The officers and directors affiliated with Nuveen serve
without any compensation from the Fund.
<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.............................. 807 71,500
Lawrence H. Brown.............................. 873 79,000
Anne E. Impellizzeri........................... 807 71,500
Peter R. Sawers................................ 807 72,000
William J. Schneider........................... 807 71,500
Judith M. Stockdale............................ 807 72,000
</TABLE>
- --------
*Former director, retired February 1999.
Each Director who is 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, 1999, the officers and directors of the Fund as a group owned less
than 1% of the outstanding shares of the Fund. On May 19, 1999, [Elaine D.
Sammons, 4242 Lomo Alto Dr., Dallas, TX 75219-1538 owned of record 9.33%]
shares of the Fund.
S-14
<PAGE>
INVESTMENT ADVISER AND INVESTMENT MANAGEMENT AGREEMENT
Nuveen Advisory acts as investment adviser for the Fund and in such capacity
manages the investment and reinvestment of the assets of the Fund. Nuveen Advi-
sory also administers the 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.
Pursuant to an investment management agreement between Nuveen Advisory and the
Fund, the Fund has agreed to pay annual management fees at the rates set forth
below, which are based on the Fund's average daily net asset value:
<TABLE>
<CAPTION>
Average Daily Net Asset Value Management Fee
- ---------------------------------------------
<S> <C>
First
$125M 0.5000 of 1%
Next $125M 0.4875 of 1%
Next $250M 0.4750 of 1%
Next $500M 0.4625 of 1%
Next $1B 0.4500 of 1%
Over $2B 0.4250 of 1%
</TABLE>
Through December 31, 1999, Nuveen Advisory has undertaken to reimburse Fund ex-
penses in an amount necessary to limit total operating expenses to .75 of 1% of
the Fund's daily net asset value. Thereafter, Nuveen Advisory may choose to
modify, continue or discontinue these reimbursements at its sole discretion.
Before June 1999 and pursuant to an investment management agreement between
Nuveen Advisory and the Fund, the Fund agreed to pay annual management fees at
the rates set forth below, which are based on the Fund's average daily net as-
set value:
<TABLE>
<CAPTION>
Average Daily Net Asset
Value Management Fees
- -------------------------------------------
<S> <C>
For the first $500 million .5000 of 1%
For the next $500 million .4750 of 1%
For assets over $1 billion .4500 of 1%
</TABLE>
For periods before June 1999, Nuveen Advisory had agreed to waive all or a por-
tion of its management fee or reimburse certain expenses of the Fund in order
to prevent total operating expenses of (including Nuveen Advisory's management
fee, but excluding interest, taxes, fees incurred in acquiring and disposing of
portfolio securities, any asset-based distribution or service fees and, to the
extent permitted, extraordinary expenses) in any fiscal year from exceeding .75
of 1% of the average daily net asset value of the Fund. Nuveen Advisory could
also voluntarily agree to reimburse additional expenses from time to time,
which could be terminated at any time in its discretion. For the last three
fiscal years, the Fund paid net management fees to Nuveen Advisory as follows:
<TABLE>
<CAPTION>
Management Fees Net of
Expense
Reimbursement Paid to Fee Waivers and Expense
Nuveen Advisory for the Reimbursements for the
Year Ended Year Ended
--------------------------- -----------------------
2/28/97 2/28/98 2/28/99 2/28/97 2/28/98 2/28/99
--------------------
<S> <C> <C> <C> <C> <C> <C>
1,377,941 1,196,845 -- -- 178,780 --
</TABLE>
S-15
<PAGE>
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. In addition, the Nuveen open-end
and closed-end funds held approximately $38 billion in securities under manage-
ment 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 Companies, Inc. ("St. Paul"). St. Paul is located in St. Paul, Minne-
sota and is principally engaged in providing property-liability insurance
through subsidiaries.
Nuveen Advisory's portfolio managers call upon the resources of Nuveen's Re-
search Department. The Nuveen Research Department reviews more than $100 bil-
lion in municipal bonds every year.
The Fund, the other Nuveen funds, Nuveen Advisory, and other related entities
have adopted a code of ethics which essentially prohibits all Nuveen fund man-
agement personnel, including Nuveen fund portfolio managers, from engaging in
personal investments which compete or interfere with, or attempt to take advan-
tage of, the Fund's anticipated or actual portfolio transactions, and is de-
signed to assure that the interest of Fund shareholders are placed before the
interest of Nuveen personnel in connection with personal investment transac-
tions.
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.
S-16
<PAGE>
Nuveen Advisory reserves the right to, and does, manage other investment ac-
counts and investment companies or other clients which may have investment ob-
jectives similar to the Fund. Subject to applicable laws and regulations,
Nuveen Advisory will attempt to allocate equitably portfolio transactions among
the Fund and the portfolios of its other clients purchasing securities whenever
decisions are made to purchase or sell securities by the Fund and one or more
of such other clients simultaneously. In making such allocations the main fac-
tors to be considered will be the respective investment objectives of the Fund
and such other clients, the relative size of portfolio holdings of the same or
comparable securities, the availability of cash for investment by the Fund and
such other clients, the size of investment commitments generally held by the
Fund and such other clients and opinions of the persons responsible for recom-
mending investments to the Fund and such other clients.
While this procedure could have a detrimental effect on the price or amount of
the securities available to the Fund from time to time, it is the opinion of
the Fund's Board of Directors that the benefits available from Nuveen
Advisory's organization will outweigh any disadvantage that may arise from ex-
posure to simultaneous transactions.
Under the Investment Company Act of 1940, the Fund may not purchase portfolio
securities from any underwriting syndicate of which Nuveen is a member except
under certain limited conditions set forth in Rule 10f-3. The Rule sets forth
requirements relating to, among other things, the type of securities purchased
by the Fund and the amount of securities which may be purchased in any one is-
sue. In addition, purchases of securities made pursuant to the terms of the
Rule must be approved at least quarterly by the Board of 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 separately for each class of the Fund's shares by The Chase Man-
hattan 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 materi-
ally affected by such changes in the value of the portfolio securities. The
Federal Reserve Bank of Boston is not open and the Fund will similarly not be
open on New Year's Day, Martin Luther King's Birthday, Washington's Birthday,
Good Friday, Memorial Day, Independence Day, Labor Day, Columbus Day, Veteran's
Day, Thanksgiving Day and Christmas Day. It is possible that changing circum-
stances during the year will result in addition or deletions to the above
lists. The net asset value per share will be computed by dividing the value of
the portfolio securities held by the Fund, plus cash or other assets, less lia-
bilities, by the total number of shares outstanding at such time.
As stated in the Prospectus, the Fund will seek to maintain a net asset value
of $1.00 per share. In this connection, the Fund values its portfolio securi-
ties at their amortized cost, as permitted by the Securities and Exchange Com-
mission (the "Commission") under Rule 2a-7 under the Investment Company Act of
1940. This method does not take into account unrealized securities gains or
losses. It involves
S-17
<PAGE>
valuing an instrument at its cost on the date of purchase and thereafter assum-
ing a constant amortization to maturity of any discount or premium. While this
method provides certainty in valuation, it may result in periods during which
the value of an investment, as determined by amortized cost, is higher or lower
than the price the Fund would receive if it sold the instrument. During periods
of declining interest rates, the daily yield on shares of the Fund may tend to
be higher than a like computation made by a fund with identical investments
utilizing a method of valuation based upon market prices and estimates of mar-
ket prices for all of its portfolio instruments. Thus, if the use of the amor-
tized cost method by the Fund resulted in a lower aggregate portfolio value on
a particular day, a prospective investor in the Fund would be able to obtain a
somewhat higher yield than would result from an investment in a fund utilizing
solely market values, and existing investors in the Fund would receive less in-
vestment income. The converse would apply in a period of rising interest rates.
The Fund, as a condition to the use of amortized cost and the maintenance of
its per share net asset value of $1.00, must maintain a dollar-weighted average
portfolio maturity of 90 days or less, only purchase instruments having remain-
ing maturities of 397 days or less, and invest only in securities determined to
be of high quality with minimal credit risks. The Fund may invest in variable
and floating rate instruments even if they carry stated maturities in excess of
397 days, upon certain conditions contained in rules and regulations issued by
the Securities and Exchange Commission under the Investment Company Act of
1940, but will do so only if there is a secondary market for such instruments
or if they carry demand features, permissible under rules of the Commission for
money market funds, to recover the full principal amount thereof upon specified
notice at par, or both.
The Board of Trustees, pursuant to Rule 2a-7, has established procedures de-
signed to stabilize, to the extent reasonably possible, the Fund's price per
share as computed for the purpose of sales and redemptions at $1.00. Such pro-
cedures will include review of the Fund's portfolio holdings by the Board of
Trustees, at such intervals as it may deem appropriate, to determine whether
the net asset value calculated by using available market quotations or market
equivalents deviates from $1.00 per share based on amortized cost. Market quo-
tations and market equivalents used in such review may be obtained from a pric-
ing agent approved by the Board of Trustees. The Board has selected Nuveen Ad-
visory to act as pricing agent, but in the future may select an independent
pricing service to perform this function. In serving as pricing agent, Nuveen
Advisory will follow guidelines adopted by the Board, and the Board will moni-
tor Nuveen Advisory to see that the guidelines are followed. The pricing agent
will value the Fund's investment based on methods which include consideration
of yield or prices of municipal obligations of comparable quality, coupon, ma-
turity, and type; indications as to values from dealers; and general market
conditions. The pricing agent may employ electronic data processing techniques
and/or a matrix system to determine valuations. The extent of any deviation be-
tween the Fund's net asset value based on the pricing agent's market valuation
and $1.00 per share based on amortized cost will be examined by the Board of
Trustees. If such deviation exceeds 1/2 of 1%, the Board of Trustees will
promptly consider what action, if any, will be initiated. In the event the
Board of Trustees determines that a deviation exists which may result in mate-
rial dilution or other unfair results to investors or existing shareholders, it
has agreed to take such corrective action as it regards as necessary and appro-
priate, including the sale of portfolio instruments prior to maturity to real-
ize capital gains or losses or to shorten average portfolio maturity.
S-18
<PAGE>
TAX MATTERS
Federal Income Tax Matters
The following discussion of federal income tax matters is based upon the advice
of Morgan, Lewis & Bockius LLP, Washington, D.C., counsel to the Fund.
As described in the Prospectus, the Fund intends to qualify, as it has in prior
years, under Subchapter M of the Internal Revenue Code of 1986, as amended,
(the "Code"), for tax treatment as a regulated investment company. In order to
qualify as a regulated investment company, the Fund must satisfy certain
requirements relating to the source of its income, diversification of its
assets, and distributions of its income to shareholders. First, the Fund must
derive at least 90% of its annual gross income (including tax-exempt interest)
from dividends, interest, payments with respect to securities loans, gains from
the sale or other disposition of stock or securities, foreign currencies or
other income (including but not limited to gains from options and futures)
derived with respect to its business of investing in such stock or securities
(the "90% gross income test"). Second, the Fund must diversify its holdings so
that, at the close of each quarter of its taxable year, (i) at least 50% of the
value of its total assets is comprised of cash, cash items, United States
Government securities, securities of other regulated investment companies and
other securities limited in respect of any one issuer to an amount not greater
in value than 5% of the value of the Fund's total assets and to not more than
10% of the outstanding voting securities of such issuer, and (ii) not more than
25% of the value of the total assets is invested in the securities of any one
issuer (other than United States Government securities and securities of other
regulated investment companies) or two or more issuers controlled by the Fund
and engaged in the same, similar or related trades or businesses.
As a regulated investment company, the Fund will not be subject to federal in-
come tax on the portion of its net investment income and net realized gain that
is currently distributed to shareholders in any taxable year for which the Fund
distributes at least 90% of the sum of (i) its "investment company taxable in-
come" (which includes dividends, taxable interest, taxable original issue dis-
count and market discount income, income from securities lending, net short-
term capital gain in excess of long-term capital loss, and any other taxable
income other than "net capital gain" (the excess of its net long-term capital
gain over its short-term capital loss) and is reduced by deductible expenses)
and (ii) its "net tax-exempt interest" (the excess of its gross tax-exempt in-
terest income over certain disallowed deductions).
The Fund also intends to satisfy conditions which will enable it to designate
certain distributions, as Exempt Interest Dividends. Shareholders receiving
Exempt Interest Dividends will not be subject to regular federal income tax on
the amount of such dividends.
Distributions by the Fund of net interest income received from certain taxable
investments (such as certificates of deposit, commercial paper and obligations
of the United States Government, its agencies and instrumentalities) and net
short-term capital gains realized by the Fund, if any, will be taxable to
shareholders as ordinary income whether received in cash or additional shares.
If the Fund purchases a security at a market discount, any gain realized by the
Fund upon the sale or redemption of the security will be treated as taxable
interest income to the extent such gain does not exceed the market
S-19
<PAGE>
discount, and any gain realized in excess of the market discount will be
treated as a capital gain. Any net long-term capital gains realized by the
Fund and distributed to shareholders in cash or in additional shares will be
taxable to shareholders as long-term capital gains regardless of the length of
time investors have owned shares of the Fund. The Fund does not expect to
realize significant long-term capital gains. Because the taxable portion of
the Fund's investment income consists primarily of interest, none of its
dividends, whether or not treated as exempt-interest dividends, is expected to
qualify under the Internal Revenue Code for the dividends received deductions
for corporations.
If the Fund has both tax-exempt and taxable income, it will use the "average
annual" method for determining the designated percentage that is taxable in-
come 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 per-
centage of income designated as tax-exempt for any particular distribution may
be substantially different from the percentage of the Fund's income that was
tax-exempt during the period covered by the distribution.
Although dividends generally will be treated as distributed when paid, divi-
dends declared in October, November or December, payable to shareholders of
record on a specified date in one of those months and paid during the follow-
ing January, will be treated as having been distributed by the Fund (and re-
ceived 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 in-
come tax. The Fund intends to make timely distributions in compliance with
these requirements and consequently it is anticipated that it generally will
not be required to pay the excise tax.
If in any year the Fund should fail to qualify under Subchapter M for tax
treatment as a regulated investment company, the Fund would incur a regular
corporate federal income tax upon its income for that year (other than inter-
est income from tax-exempt securities) and distributions to its shareholders
out of net interest income from tax-exempt securities or other investments, or
out of net capital gains, would be taxable to shareholders as ordinary divi-
dend income for federal income tax purposes to the extent of the Fund's avail-
able earnings and profits.
The Fund may invest in the type of private activity bonds the interest on
which is not federally tax-exempt to persons who are "substantial users" of
the facilities financed by such bonds or "related persons" of such "substan-
tial users." Accordingly, the Fund may not be an appropriate investment for
S-20
<PAGE>
a shareholder who is considered either a "substantial user" or a "related per-
son" within the meaning of the Code. In general, a "substantial user" of a fa-
cility financed from the proceeds of private activity bonds includes a "non-ex-
empt person who regularly uses a part of such facility in his trade or busi-
ness." "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 corpora-
tions under the Code). This includes a partnership and each of its partners
(including their spouses and minor children) and an S corporation and each of
its shareholders (and their spouses and minor children). Various combinations
of these relationships may also constitute "related persons" under the Code.
For additional information, investors should consult their tax advisers before
investing in the Fund.
Federal tax law imposes an alternative minimum tax with respect to both corpo-
rations and individuals. Interest on certain securities, such as bonds issued
to make loans for housing purposes or to private entities (but not for certain
tax-exempt organizations such as universities and non-profit hospitals), is in-
cluded as an item of tax preference in determining the amount of a taxpayer's
alternative minimum taxable income. To the extent that the Fund receives income
from securities subject to the alternative minimum tax, a portion of the divi-
dends paid by it, although otherwise exempt from federal income tax, will be
taxable to shareholders to the extent that their tax liability is determined
under the alternative minimum tax regime. The Fund will annually supply share-
holders with a report indicating the percentage of Fund income attributable to
securities subject to the federal alternative minimum tax.
In addition, the alternative minimum taxable income for corporations is in-
creased by 75% of the difference between an alternative measure of income ("ad-
justed current earnings") and the amount otherwise determined to be the alter-
native minimum taxable income. Interest on all securities, and therefore all
distributions by the Fund that would otherwise be tax-exempt, is included in
calculating a corporation's adjusted current earnings.
Individuals whose provisional income exceeds a base amount will be subject to
federal income tax on up to one-half of their social security or railroad re-
tirement benefits. Provisional income currently includes adjusted gross income,
one-half of social security benefits and tax-exempt interest, including exempt-
interest dividends from the Fund. Individuals whose modified income exceeds an
adjusted base amount are required to include in gross income up to 85% of their
social security or railroad retirement benefits.
The Code provides that interest on indebtedness incurred or continued to pur-
chase or carry shares of the Fund is not deductible. Under rules used by the
IRS for determining when borrowed funds are considered used for the purpose of
purchasing or carrying particular assets, the purchase of shares of the Fund
may be considered to have been made with borrowed funds even though such funds
are not directly traceable to the purchase of shares.
The Fund is required in certain circumstances to withhold 31% of taxable divi-
dends and certain other payments paid to non-corporate holders of shares who
have not furnished to the Fund their correct taxpayer identification number (in
the case of individuals, their social security number) and certain certifi-
cates, or who are otherwise subject to back-up withholding.
S-21
<PAGE>
The foregoing is a general and abbreviated summary of the provisions of the
Code and Treasury Regulations presently in effect as they directly govern the
taxation of the Fund and its shareholders. For complete provisions, reference
should be made to the pertinent Code sections and Treasury Regulations. The
Code and Treasury Regulations are subject to change by legislative or adminis-
trative action, and any such change may be retroactive with respect to Fund
transactions. Shareholders are advised to consult their own tax advisers for
more detailed information concerning the federal taxation of the Fund and the
income tax consequences to its shareholders.
State Tax Matters
The following is based upon the advice of Morgan, Lewis & Bockius LLP, Washing-
ton, D.C. counsel to the Fund, and assumes that the Fund will be qualified as a
regulated investment company under Subchapter M of the Code.
The exemption from federal income tax for distributions which are designated
Exempt Interest Dividends will not necessarily result in exemption under the
income or other tax laws of any state or local taxing authority. The laws of
the several states and local taxing authorities vary with respect to the taxa-
tion of such distributions, and shareholders of the Fund are advised to consult
their own tax advisers in that regard.
PERFORMANCE INFORMATION
The historical performance may be expressed in terms of "yield," "effective
yield" or "taxable equivalent yield." The Fund's "yield" refers to the rate of
income generated by an investment in the Fund over a specified seven-day peri-
od, expressed as an annualized figure. "Effective yield" is calculated simi-
larly except that, when annualized, the income earned by the investment is as-
sumed to be reinvested. Due to this compounding effect, the effective yield
will be slightly higher than the yield. Yield figures will fluctuate over time.
"Taxable equivalent yield" is the yield that a taxable investment would need to
generate in order to equal the Fund's yield on an after-tax basis for an in-
vestor in a stated tax bracket (normally assumed to be the bracket with the
highest marginal tax rate). A taxable equivalent yield quotation will be higher
than the yield or the effective yield quotations for the Fund. The Fund's yield
and effective yield for the seven-day period ended February 28, 1999 were %
and %, respectively. These various measures of performance are described
below.
Yield is computed in accordance with a standard method prescribed by rules of
the Securities and Exchange Commission. Under that method, current yield is
based on a seven-day period and is computed as follows: The Fund's net invest-
ment income per share for the period is divided by the price per share (ex-
pected to remain constant at $1.00) at the beginning of the period, the result
(the "base period return") is divided by 7 and multiplied by 365, and the re-
sulting figure is carried to the nearest hundredth of one percent. For the pur-
pose of this calculation, the Fund's net investment income per share includes
its accrued interest income plus or minus amortized purchase discount or pre-
mium less accrued expenses, but does not include realized capital gains or
losses or unrealized appreciation or depreciation of investments.
S-22
<PAGE>
The Fund's effective yield is calculated by taking the base period return (com-
puted as described above) and calculating the effect of assumed compounding.
The formula for effective yield is: (base period return + 1) 365/7 - 1.
The Fund's taxable equivalent yield is computed by dividing that portion of the
Fund's yield which is tax-exempt by 1 minus the stated federal income tax rate
and adding the result to that portion, if any, of the yield of the Fund that is
not tax-exempt.
The Fund's yield will fluctuate, and the publication of annualized yield quota-
tions is not a representation of what an investment in the Fund will actually
yield for any given future period. Actual yields will depend not only on
changes in interest rates on money market instruments during the period in
question, but also on such matters as the expenses of the Fund.
In reports or other communications to shareholders or in advertising and sales
literature, the Fund may compare its performance to that of other money market
mutual funds tracked by Lipper Analytical Services, Inc. ("Lipper"), by
Donoghue's Money Fund Report ("Donoghue's") or similar services or by financial
publications such as Barron's, Changing Times, Forbes and Money Magazine. Per-
formance comparisons by these indexes, services or publications may rank mutual
funds over different periods of time by means of aggregate, average, year-by-
year or other types of performance figures. Lipper performance calculations in-
clude the reinvestment of all capital gain and income dividends for the periods
covered by the calculations. As reported by Donoghue's, all investment results
represent total return (annualized results for the period net of management
fees and expenses) and one year investment results are effective annual yields
assuming reinvestment of dividends.
A comparison of tax-exempt and taxable equivalent yields is one element to con-
sider in making an investment decision. The Fund may from time to time in its
advertising and sales materials compare its then current yields as of a recent
date with the yields on taxable investments such as corporate or U.S. Govern-
ment bonds and bank CDs or money market accounts, each of which has investment
characteristics that may differ from those of the Fund. U.S. Government bonds,
for example, are backed by the full faith and credit of the U.S. Government,
and bank CDs and money market accounts are generally shorter term investments
insured by an agency of the federal government. Bank money market accounts and
money market funds provide stability of principal but pay interest at rates
which vary with the condition of the short-term taxable debt market.
S-23
<PAGE>
The following table shows the effects for individuals of federal income taxes
on the amount that those subject to a given tax rate would have to put into a
tax-free investment in order to generate the same after-tax income as a taxable
investment.*
Read down to find the amount of a tax-free investment at the specified rate
that would provide the same after-tax income as a $50,000 taxable invest-
ment at the stated taxable rate.
<TABLE>
<CAPTION>
2.00% 2.50% 3.00% 3.50% 4.00% 4.50% 5.00%
Taxable Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
3.00% $ 51,750 $41,400 $34,500 $29,571 $25,875 $23,000 $20,700
- -----------------------------------------------------------------------
4.00% $ 69,000 $55,200 $46,000 $39,429 $34,500 $30,667 $27,600
- -----------------------------------------------------------------------
5.00% $ 86,250 $69,000 $57,500 $49,286 $43,125 $38,333 $34,500
- -----------------------------------------------------------------------
6.00% $103,500 $82,800 $69,000 $59,143 $51,750 $46,000 $41,400
- -----------------------------------------------------------------------
7.00% $120,750 $96,600 $80,500 $69,000 $60,375 $53,667 $48,300
- -----------------------------------------------------------------------
</TABLE>
*The dollar amounts in the table reflect a 31% federal income tax rate.
The table is for illustrative purposes only and is not intended to predict the
actual return you might earn on your investment. The Fund occasionally may ad-
vertise its performance in similar tables using a different current tax rate
than that shown here. The tax rate shown here may be higher or lower than your
actual tax rate; a higher tax rate would tend to make the dollar amounts in the
table lower, while a lower tax rate would make the amounts higher. You should
consult your tax adviser to determine your actual tax rate.
Taxable Equivalent Yield Tables
The following tables show the effects for individuals of federal income taxes
on what you would have to earn on a taxable investment to equal a given tax-
free yield. These tables are for illustrative purposes only and are not in-
tended to predict the actual return you might earn on a Fund investment. The
Fund occasionally may advertise its performance in similar tables using other
current tax rates than those shown here. The tax rates used in these tables
have been rounded to the nearest one-half of one percent. They are based upon
published 1999 marginal federal tax rates and do not take into account changes
in tax rates that are proposed from time to time. A taxpayer's marginal tax
rate is affected by both his taxable income and his adjusted gross income. The
tables assume taxpayers are not subject to any alternative minimum taxes and
deduct any state income taxes paid on their federal income tax return. They re-
flect the effect of the current federal tax limitations on itemized deductions
and personal exemptions, which were designed to phase out certain benefits of
these deductions for higher income taxpayers. These limitations are subject to
certain maximums, which depend on the number of exemptions claimed and the to-
tal amount of the taxpayer's itemized deductions. For example, the limitation
on itemized deductions will not cause a taxpayer to lose more than 80% of his
allowable itemized deductions with certain exceptions. The tax rates shown here
may be higher or lower than your actual tax rate.
S-24
<PAGE>
Marginal tax rates for joint taxpayers with four personal exemptions
<TABLE>
<CAPTION>
Federal Tax-Free Yield
Federal Adjusted Federal 2.00% 2.50% 3.00% 3.50% 4.00% 4.50% 5.00%
Taxable Gross Tax -----------------------------------------------------------------------
Income Income Ratio Taxable Equivalent Yield
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0-
42,350 $ 0-124,500 15.0% 2.35 2.94 3.53 4.12 4.71 5.29 5.88
42,350-
102,300 0-124,500 28.0 2.78 3.47 4.17 4.86 5.58 6.25 6.94
124,500-186,800 29.0 2.82 3.52 4.23 4.93 5.63 6.34 7.04
102,300-
155,050 0-124,500 31.0 2.90 3.62 4.35 5.07 5.80 6.52 7.25
124,500-186,800 32.0 2.94 3.68 4.41 5.15 5.88 6.62 7.35
186,800-309,300 34.5 3.05 3.82 4.58 5.34 6.11 6.87 7.63
155,950-
278,450 124,500-186,800 37.0 3.17 3.97 4.78 5.56 6.35 7.14 7.94
186,800-309,300 40.0 3.33 4.17 5.00 5.83 6.67 7.50 8.33
Over 309,300 37.0 3.17 3.97 4.76 5.56 6.35 7.14 7.94
Over
278,450 186,800-309,300 44.0 3.57 4.46 5.36 6.25 7.14 8.04 8.93
Over 309,300 41.0 3.39 4.24 6.06 5.93 6.78 7.63 8.47
- -----------------------------------------------------------------------------------------------------------
</TABLE>
Marginal tax rates for single taxpayers with one personal exemption
<TABLE>
<CAPTION>
Federal Combined
Federal Adjusted State Tax-Free Yield
Taxable Gross and 2.00% 2.50% 3.00% 3.50% 4.00% 4.50% 5.00%
Income Income Federal --------------------------------------------------------------------
Tax Rate Taxable Equivalent Yield
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0-
25,350 $ 0-124,500 15.0% 2.35 2.94 3.53 4.12 4.71 5.29 5.88
25,350-
61,400 0-124,500 28.0 2.78 3.47 4.17 4.96 5.56 6.25 6.94
61,400-
128,100 0-124,500 31.0 2.90 3.62 4.35 5.07 5.80 6.52 7.25
124,500-247,000 32.5 2.96 3.70 4.44 5.19 5.93 6.67 7.41
128,100-
278,450 124,500-247,000 38.0 3.23 4.03 4.84 5.65 6.45 7.26 8.06
Over 247,000 37.0 3.17 3.97 4.76 5.58 6.35 7.14 7.94
Over
278,450 Over 247,000 41.0 3.38 4.24 5.08 5.93 6.78 7.63 8.47
- ----------------------------------------------------------------------------------------------------------
</TABLE>
ADDITIONAL INFORMATION ABOUT PURCHASES AND SALES
Exchange Privileges
You may exchange shares of the fund for the appropriate class of shares of any
other open-end management investment company with reciprocal exchange privi-
leges advised by Nuveen Advisory (the "Nuveen Funds"), into an identically reg-
istered account, provided that the Nuveen Fund into which shares are to be ex-
changed is offered in the shareholder's state of residence and that the shares
to be exchanged have been held by the shareholder for a period of at least 15
days. You may exchange fund shares by calling (800) 257-8787 or by mailing your
written request to our Transfer Agent. Shares of Nuveen Funds purchased subject
to a front-end sales charge may be exchanged for shares of the fund or any
other Nuveen Fund at the next determined net asset value without any front-end
sales charge. No CDSC otherwise applicable will be assessed on an exchange, and
the holding period of your investment will be carried over to the new fund for
purposes of determining any future CDSC. You may exchange Class B shares for
shares of a Nuveen money market fund. Shares of any Nuveen Fund purchased
through dividend reinvestment or through reinvestment of Nuveen Unit Trust dis-
tributions (and any dividends thereon) may be exchanged for Class A shares of
any Nuveen Fund without a front-end sales
S-25
<PAGE>
charge. Exchanges of shares with respect to which no front-end sales charge has
been paid will be made at the public offering price, which may include a front-
end sales charge, unless a front-end sales charge has previously been paid on
the investment represented by the exchanged shares (i.e., the shares to be ex-
changed were originally issued in exchange for shares on which a front-end
sales charge was paid), in which case the exchange will be made at net asset
value. Because certain other Nuveen Funds may determine net asset value and
therefore honor purchase or redemption requests on days when the fund does not
(generally, Martin Luther King's Birthday, Columbus Day and Veterans Day), ex-
changes of shares of one of those funds for shares of the fund may not be ef-
fected on such days.
The total value of shares being exchanged must at least equal the minimum in-
vestment requirement of the Nuveen Fund into which they are being exchanged.
Exchanges are made based on the relative dollar values of the shares involved
in the exchange, and will be effected by redemption of shares of the Nuveen
Fund held and purchase of the shares of the other Nuveen Fund. For federal in-
come tax purposes, any such exchange constitutes a sale and purchase of shares
and may result in capital gain or loss. Before exercising any exchange, you
should obtain the Prospectus for the Nuveen Fund into which shares are to be
exchanged and read it carefully. If the registration of the account for the
fund you are purchasing is not exactly the same as that of the fund account
from which the exchange is made, written instructions from all holders of the
account from which the exchange is being made must be received, with signatures
guaranteed by a member of an approved Medallion Guarantee Program or in such
other manner as may be acceptable to the fund. The exchange privilege may be
modified or discontinued at any time. If you do not wish to have telephone ex-
change privileges, you must indicate this in the "Telephone Services" section
of your Account Application or otherwise notify the Fund in writing of your
desire.
Additional Information
An account will be maintained for each shareholder of record in the fund by our
Transfer Agent. Share certificates will be issued only upon written request of
the shareholder to our Transfer Agent. No certificates are issued for frac-
tional shares. The fund reserves the right to reject any purchase order and to
waive or increase minimum investment requirements.
Confirmations of each purchase and redemption order as well as monthly state-
ments are sent to every shareholder. Master accounts also receive a monthly
summary report setting forth the share balance and dividends earned for the
month for each sub-account established under that master account.
To assist those institutions performing their own-sub-accounting, same day in-
formation as to the fund's daily per share income to seven decimal places and
the one-day yield to four decimal places are normally available by 3:30 p.m.,
Eastern Time.
A change in registration or transfer of shares held in the name of a
broker/dealer can only be effected by an order in good form from the
broker/dealer acting on behalf of the investor. Broker/dealers are encouraged
to open single master accounts. However, some broker/dealers may wish to use
our Transfer Agent's sub-accounting system to minimize their internal record-
keeping requirements. A broker/dealer or other investor requesting shareholder
servicing or accounting other than the master account or subaccounting service
offered by the fund will be required to enter into a separate agreement with
the agent for these services for a fee to be determined in accordance with the
level of services to be furnished.
S-26
<PAGE>
Banks and other organizations through which investors may purchase shares of
the fund may impose charges in connection with purchase orders. Investors
should contact their institutions directly to determine what charges, if any,
may be imposed.
Subject to the rules of the SEC, the fund reserves the right to suspend the
continuous offering of the shares at any time, but such suspension shall not
affect the shareholder's right of redemption as described below. The fund also
reserves the right to reject any purchase order and to waive or increase mini-
mum investment requirements.
Telephone Redemption via Fund Direct
To redeem shares held in non-certificate form by telephone with the redemption
proceeds paid via Fund Direct-Electronic Funds Transfer, you must complete the
Telephone Services section of the enclosed Application Form and return it to
Nuveen or our Transfer Agent. If you did not authorize Telephone Redemption
via Fund Direct when you opened your account, you may do so by sending a writ-
ten request to the Fund signed by each account owner with signatures guaran-
teed 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 ad-
vantage of two methods of telephone redemption: regular telephone redemption
and expedited telephone redemption. You may make regular Fund Direct redemp-
tion requests by calling Nuveen at (800) 257-8787. If a regular telephone re-
demption 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 ef-
fected 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 busi-
ness day following the request. For all regular redemptions, you will typi-
cally receive your funds within three business days after your redemption is
effected. You may make expedited telephone redemption requests to redeem
shares that are worth at least $1,000 by calling Nuveen at (800) 257-8787. If
an expedited redemption request is received by 12:00 noon Eastern Time, the
shares to be redeemed do not earn income on that day, but the redemption is
effected, and you will normally receive your funds, on that day. If an expe-
dited 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 ex-
pedited redemption requests.
How to Change Authorized Redemption Instructions
In order to establish multiple accounts, or to change the account or accounts
designated to receive redemption proceeds, a written request specifying the
change must be sent to Nuveen. This request must be signed by each account
owner with signatures guaranteed by a member of an approved Medal-
S-27
<PAGE>
lion 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 op-
tion, may limit the timing, amount or frequency of these redemptions. This pro-
cedure may be modified or terminated at any time, on 30 days' notice, by the
fund. The fund, the transfer agent and Nuveen will not be liable for following
telephone instructions reasonably believed to be genuine.
Redemption in Kind
The fund has committed to pay in cash all redemption requests made by each
shareholder during any 90 day period up to the lesser of $250,000 or 1% of the
net asset value of the fund at the beginning of such period. This commitment is
irrevocable without the prior approval of the SEC and is a fundamental policy
of the fund which may not be changed without shareholder approval. In the case
of redemption requests in excess of such amounts, the Board of Directors re-
serves the right to have the fund make payment in whole or in part in securi-
ties or other assets of the fund in case of an emergency or any time a cash
distribution would impair the liquidity of the Fund to the detriment of the ex-
isting shareholders. In this event, the securities would be valued in the same
manner as the portfolio of the fund is valued. If the recipient were to sell
such securities, he or she would incur brokerage charges.
Other Practices
The fund may suspend the right of redemption or delay payment more than seven
days (a) during any period when the New York Stock Exchange is closed (other
than customary weekend and holiday closings), (b) when trading in the markets
the fund normally utilizes is restricted, or an emergency exists as determined
by the SEC so that disposal of the Fund's investments or determination of its
net asset value is not reasonably practicable, or (c) for such other periods as
the SEC by order may permit for protection of the shareholders of the Fund.
The fund has authorized certain brokers and firms to accept purchase and re-
demption orders on its behalf. The fund will consider an order to be "received"
when such a broker or firm accepts the order from its customer.
SERVICE PLAN
The Fund has adopted a Service Plan pursuant to Rule 12b-1 under the 1940 Act.
The Plan was adopted by the Board of Directors, including a majority of direc-
tors who are not interested persons and who have no direct or indirect finan-
cial interest in the Plan, and approved by shareholders.
Under the Plan, the Fund pays Nuveen an annual 12b-1 fee according to the
schedule below. Nuveen will pay this fee to authorized dealers of record, in-
cluding Nuveen, for providing ongoing services to the Fund and its sharehold-
ers. Such services generally include establishing and maintaining shareholder
accounts, processing purchase and redemption orders, arranging for bank wires
and answering shareholder inquiries. Under the Plan, the Fund pays the entire
amount of the
S-28
<PAGE>
12b-1 Fees. Nuveen may, in its discretion and from its own resources, pay cer-
tain financial service firms additional amounts for services rendered to
shareholders.
The annual 12b-1 fee under the Plan is computed as follows:
<TABLE>
<CAPTION>
Net Assets of Serviced 12b-1
Accounts Fee
- --------------------------------
<S> <C>
Less than $2 million .10%
$2 million to $5 million .15%
$5 million to $10 million .20%
$10 million and over .25%
- --------------------------------
</TABLE>
Under the Plan, the Controller or Treasurer of the fund will report quarterly
to the Board of Directors for its review amounts expended for distribution
services. The Plan, 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 per-
sons" and who have no direct or indirect financial interest in the Plan or any
related agreements or by vote of a majority of the outstanding voting securi-
ties 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-in-
terested directors who have no direct or indirect financial interest in the
Plan or the related service agreements cast in person at a meeting called for
the purpose of voting on the Plan. The Plan may be continued only if the Di-
rectors who vote to approve such continuance conclude, in the exercise of rea-
sonable business judgment and in light of their fiduciary duties under appli-
cable 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 con-
tinuance 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. Nuveen's compensation under
the Plan is not based on Nuveen's expenses incurred in providing services to
shareholders.
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.
S-29
<PAGE>
Before June 1999, Fund shares were offered subject to a 12b-1 fee pursuant to a
Distribution Plan. The Plan was adopted by a vote of the Board of Directors in-
cluding a majority of the directors who are not interested persons of the Fund
and who have no direct or indirect financial interest in the operation of the
Plan. Under the Plan, the Fund and Nuveen paid fees to service organizations
for services rendered in the distribution of shares of the Fund or the servic-
ing of shareholder accounts. Nuveen entered into service agreements with orga-
nizations who render such services. Service payments to such organizations were
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>
Payments of the above fees were split evenly between Nuveen and the fund and
thus the maximum the fund paid on an annualized basis was .15 of 1%. Nuveen
could, in its discretion, pay from its own resources to a service organization
satisfying certain criteria an additional amount not to exceed in the case of a
given service organization the greater of (a) .05 of 1% per year based on 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, 1999, the Fund paid fees to service organizations under the Plan
in the amount of $115,000.
OTHER INFORMATION REGARDING SHARES OF THE FUND
Shareholders should note that when a fund dividend check has been returned to
the sender by the post office after repeated mailings, the shareholder account
will thereafter be registered for automatic reinvestment of dividends and thus
the dividend check and future dividend checks will be reinvested in additional
Fund shares. Shareholders are reminded that they need to advise the Funds
promptly in writing of any change in address.
The Glass-Steagall Act and other applicable laws, among other things, may limit
banks from engaging in the business of underwriting, selling or distributing
securities. Since the only functions of banks who may be engaged as service or-
ganizations is to perform administrative shareholder servicing functions, the
fund believes that such laws should not preclude a bank from acting as a serv-
ice organization. However, future changes in either federal or state statutes
or regulations relating to the permissible activities of banks and their sub-
sidiaries or affiliates, as well as judicial or administrative decisions or in-
terpretations of statutes or regulations, could prevent a bank from continuing
to perform all or a part of its shareholder servicing activities. If a bank
were prohibited from so acting, its shareholder customers would be permitted to
remain shareholders of the Fund and alternative means for continuing the ser-
vicing of such shareholders would be sought.
Nuveen serves as the principal underwriter of the shares of the fund pursuant
to a "best efforts" arrangement as provided by a distribution agreement with
the Fund, dated February 1, 1987 and last renewed on February 24, 1993 ("Dis-
tribution Agreement"). Pursuant to the Distribution Agreement, the Fund, ap-
pointed Nuveen to be its agent for the distribution of the Fund's shares on a
continuous offering
S-30
<PAGE>
basis. Nuveen sells shares to or through brokers, dealers, banks or other qual-
ified financial intermediaries (collectively referred to as "Dealers"), or oth-
ers, in a manner consistent with the Fund's then effective registration state-
ment. Pursuant to the Distribution Agreement, Nuveen, at its own expense, fi-
nances certain activities incident to the sale and distribution of the Fund's
shares, including printing and distributing of prospectuses and Statements of
Additional Information to other than existing shareholders, the printing and
distributing of sales literature, advertising and payment of compensation and
giving of concessions to dealers. Expenses incurred in registering the Fund and
its shares under federal and state securities laws are paid by the Fund.
To help advisers and investors better understand and more efficiently use an
investment in the Fund to reach their investment goals, the Fund and its spon-
sor, Nuveen, may advertise and create specific investment programs and systems.
For example, such activities may include presenting information on how to use
an investment in the Fund, alone or in combination with an investment in other
mutual funds or unit investment trusts sponsored by Nuveen, to accumulate as-
sets for future education needs or periodic payments such as insurance premi-
ums. The Fund and its sponsor may produce software or additional sales litera-
ture to promote the advantages of using the Fund to meet these and other spe-
cific investor needs.
S-31
<PAGE>
PART C--OTHER INFORMATION
NUVEEN MUNICIPAL MONEY MARKET FUND, INC.
333 West Wacker Drive
Chicago, Illinois 60606
<PAGE>
PART C--OTHER INFORMATION
Item 23: Exhibits.
<TABLE>
<C> <S>
(a) 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.
(b) 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.
(c) Not applicable.
(d)(1) 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) as filed on April 27,
1995, and incorporated herein by reference thereto.
(d)(2) Renewal, dated May 5, 1998, of Investment Management Agreement.
Filed as Exhibit 5(b) to Post-Effective Amendment No. 17 to the
Registrant's Registration Statement on Form N-1A (File No. 2-
78736) as filed on June 16, 1998, and incorporated herein by
reference thereto.
(e)(1) 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.
(e)(2) Renewal, dated July 31, 1997, of Distribution Agreement. Filed as
Exhibit 6(b) to Post-Effective Amendment No. 17 to the
Registrant's Registration Statement on Form N-1A (File No. 2-
78736) as filed on June 16, 1998, and incorporated herein by
reference thereto.
(f) Not applicable.
(g)(1). 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.
(g)(2). 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.
(h). Transfer Agency Agreement between Registrant and Shareholder
Services, Inc. dated July 1, 1997. Filed as Exhibit 5(b) to Post-
Effective Amendment No. 17 to the Registrant's Registration
Statement on Form N-1A (File No. 2-78736) as filed on June 16,
1998, and incorporated herein by reference thereto.
(i). Opinion of Morgan, Lewis & Bockius LLP to be filed by later
amendment.
</TABLE>
C-1
<PAGE>
<TABLE>
<C> <S>
(j). Consent of Independent Public Accountants to be filed by later
amendment.
(k). Not applicable.
(l). Not applicable.
(m). 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) as filed on June 27, 1996, and incorporated herein by
reference thereto.
(n). Not applicable.
(o). Not applicable.
99(p). 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(s)(1). 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. Filed as
Exhibit 99(c) to Post-Effective Amendment No. 17 to Registrant's
Registration Statement on Form N-1A (File No. 2-78736) and
incorporated herein by reference thereto.
99(s)(2). 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 was filed as Exhibit 99(c) to Post-
Effective Amendment No. 17 to Registrant's Registration
Statement on Form N-1A (File No. 2-78736) as filed on June 16,
1998, and is incorporated herein by reference thereto. 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) as filed
on June 2, 1997, and is incorporated herein by reference
thereto.
99(q). 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) as filed
on April 27, 1995, and incorporated herein by reference thereto.
</TABLE>
Item 24: Persons Controlled by or under Common Control with Registrant
Not applicable.
C-2
<PAGE>
Item 25: 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 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 disabling conduct or, (2) in the absence of such a decision, a reason-
able determination, based upon a review of the facts, that the indemnitee
was not liable by reason of disabling conduct, by (a) the vote of a major-
ity 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 proceeding, 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
C-3
<PAGE>
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 prece-
dent, 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 liability
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 be-
lieved 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 26: Business and Other Connections of Investment Adviser
Nuveen Advisory Corp. serves as investment adviser to the following open-end
management type investment companies: Nuveen Flagship Multistate Trust I,
Nuveen Flagship Multistate Trust II, Nuveen Flagship Multistate Trust III,
Nuveen Flagship Multistate Trust IV, Nuveen Flagship Municipal Trust, Nuveen
Taxable Funds Inc., Nuveen California Tax-Exempt Money Market Fund, Inc.,
Nuveen New York Tax-Exempt Money Market Fund, Nuveen Institutional Tax-Exempt
Money Market Fund, Inc., and Nuveen Municipal Money Market Fund, 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 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 Advan-
tage Fund, Inc., Nuveen Municipal Market Opportunity Fund, Inc., Nuveen Cali-
fornia Municipal Market Opportunity Fund, Inc., Nuveen Investment Quality Mu-
nicipal Fund, Inc., Nuveen California Investment Quality Municipal Fund, Inc.,
Nuveen New York Investment Quality Municipal Fund, Inc., Nuveen Insured Quality
Municipal Fund, Inc., Nuveen Florida Investment Quality Municipal Fund, Nuveen
New Jersey Investment Quality Municipal Fund, Inc., Nuveen Pennsylvania Invest-
ment 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 In-
sured 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 Pre-
mier Insured Municipal Income Fund, Inc., Nuveen Pre -
C-4
<PAGE>
mium 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 Municipal Fund,
Nuveen Michigan Premium Income Municipal Fund, Inc., Nuveen New Jersey Premium
Income Municipal Fund, Inc., Nuveen Premium Income Municipal Fund 4, Inc.,
Nuveen Insured California Premium Income Municipal Fund 2, Inc., Nuveen Penn-
sylvania Premium Income Municipal Fund 2, Nuveen Maryland Premium Income Munic-
ipal 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 Munic-
ipal Fund and Nuveen Insured Premium Income Municipal Fund 2. Nuveen Advisory
Corp. has no other clients or business at the present time. The principal busi-
ness 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, 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.
Item 27: 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 Multistate Trust II, Nuveen Flagship
Multistate Trust III, Nuveen Flagship Multistate Trust IV, Nuveen Flagship Mu-
nicipal Trust, Nuveen California Tax-Exempt Money Market Fund, Inc., Nuveen New
York Tax-Exempt Money Market Fund, Nuveen Institutional Tax-Exempt Money Market
Fund, Inc., Nuveen Municipal Money Market Fund, Inc., Nuveen Money Market
Trust, Nuveen Taxable Funds, Inc., Nuveen Investment Trust, Nuveen Investment
Trust II and Nuveen Investment Trust III. Nuveen also acts as depositor and
principal underwriter of the Nuveen Tax-Exempt Unit Trust and Nuveen Unit
Trusts, registered unit investment trusts. Nuveen has also served as a co-man-
aging 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 Perfor-
mance Plus Municipal Fund, Inc., Nuveen New York Performance Plus Municipal
Fund, Inc., Nuveen Municipal Advantage Fund, Inc., Nuveen Municipal Market Op-
portunity Fund, Inc., Nuveen California Municipal Market Opportunity Fund,
Inc., Nuveen Investment Quality Municipal Fund, Inc., Nuveen California Invest-
ment Quality Municipal Fund, Inc., Nuveen New York Invest -
C-5
<PAGE>
ment Quality Municipal Fund, Inc., Nuveen Insured Quality Municipal Fund, Inc.,
Nuveen Florida Investment Quality Municipal Fund, Nuveen New Jersey Investment
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 Municipal Op-
portunity Fund, Inc., Nuveen Florida Quality Income Municipal Fund, Nuveen
Michigan Quality Income Municipal Fund, Inc., Nuveen Ohio Quality Income Munic-
ipal 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 Select Tax-Free Income Portfolio, 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 Municipal Fund,
Nuveen Michigan Premium Income Municipal Fund, Inc., Nuveen New Jersey Premium
Income Municipal Fund, Inc., Nuveen Premium Income Municipal Fund 4, Inc.,
Nuveen Insured California Premium Income Municipal Fund 2, Inc., Nuveen Penn-
sylvania Premium Income Municipal Fund 2, Nuveen Maryland Premium Income Munic-
ipal 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 Munic-
ipal Fund, Nuveen Insured Premium Income Municipal Fund 2, Nuveen Select Tax-
Free Income Portfolio 2, Nuveen Insured California Select Tax-Free Income Port-
folio, Nuveen Insured New York Select Tax-Free Income Portfolio and Nuveen Se-
lect Tax-Free Income Portfolio 3.
(b)
<TABLE>
<CAPTION>
Name and
Principal
Business Positions and Offices Positions and Offices
Address with Underwriter with Registrant
- -------------------------------------------------------------------------------
<S> <C> <C>
Timothy R. Chairman of the Board, Chairman of the Board
Schwertfeger Chief Executive Officer and Director
333 West Wacker and Director
Drive
Chicago, IL
60606
John P. Amboian President None
333 West Wacker
Drive
Chicago, IL
60606
Alan G. Vice President Vice President and Assistant Secretary
Berkshire
333 West Wacker
Drive
Chicago, IL
60606
William Adams Vice President None
IV
333 West Wacker
Drive
Chicago, IL
60606
</TABLE>
C-6
<PAGE>
<TABLE>
<S> <C> <C>
Clifton L. Fenton Vice President None
333 West Wacker Drive
Chicago, IL 60606
Kathleen M. Flanagan Vice President Vice President
333 West Wacker Drive
Chicago, IL 60606
Stephen D. Foy Vice President Vice President and Controller
333 West Wacker Drive
Chicago, IL 60606
Robert D. Freeland Vice President None
333 West Wacker Drive
Chicago, IL 60606
Michael G. Gaffney Vice President None
333 West Wacker Drive
Chicago, IL 60606
Anna R. Kucinskis Vice President Vice President
333 West Wacker Drive
Chicago, IL 60606
Robert B. Kuppenheimer Vice President None
333 West Wacker Drive
Chicago, IL 60606
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
Paul C. Williams Vice President None
333 West Wacker Drive
Chicago, IL 60606
</TABLE>
C-7
<PAGE>
<TABLE>
<S> <C> <C>
Margaret E. Wilson Vice President and None
333 West Wacker Drive Corporate Controller
Chicago, IL 60606
Gifford R. Zimmerman Vice President and Vice President and
333 West Wacker Drive Assistant Secretary Secretary
Chicago, IL 60606
</TABLE>
Item 28: 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, maintains
all general and subsidiary ledgers, journals, trial balances, records of all
portfolio purchases and sales, and all other required records not maintained by
Nuveen Advisory Corp., Shareholder Services, Inc., or Chase Global Funds Serv-
ices Company.
Until August 10, 1998, Shareholder Services, Inc., P.O. Box 5330, Denver, Colo-
rado 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 29: Management Services
Not applicable.
Item 30: 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 has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in
this City of Chicago, and State of Illinois, on the 13th day of May, 1999.
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 May 13, 1999
Controller (Principal
Financial and
Accounting Officer)
Timothy R. Schwertfeger Chairman of the Board
and Director (Principal
Executive Officer)
Robert P. Bremner Director
Lawrence H. Brown Director /s/ Gifford R.
Anne E. Impellizzeri Director Zimmerman
Peter R. Sawers Director
William J. Schneider Director
Judith M. Stockdale Director
</TABLE>
By_________________________
Gifford R. Zimmerman
Attorney-in-Fact
May 13, 1999
An original power of attorney authorizing, among others, Gifford R. Zimmerman
and Larry W. Martin to execute this Registration Statement, and Amendments
thereto, for 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
