<PAGE>
As filed with the Securities and Exchange Commission on June 16, 1998.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
[_]
File No. 33-01971
Pre-Effective Amendment No.
--- [_]
[X]
Post-Effective Amendment No. 24
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
[_]
File No. 811-04508
[X]
Amendment No. 24
NUVEEN CALIFORNIA TAX-FREE FUND, INC.
(Exact Name of Registrant as Specified in Charter)
333 West Wacker Drive, Chicago, 60606
Illinois
(Address of Principal Executive (Zip Code)
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 (date) pursuant to paragraph
[_] (a)(1)
75 days after filing pursuantto para-
[X] graph (a)(2)
on June 24, 1998 pursuant to paragraph (b)
[_] on (date) pursuant to paragraph
[_] (a)(2) ofRule 485.
60 days after filing pursuant to paragraph (a)(1)
If appropriate, check the following box:
[_]
This post-effective amendment designates a new effective date for a previ-
ously filed post-effective amendment.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
CONTENTS
OF
POST-EFFECTIVE AMENDMENT NO. 24
TO
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
FILE NO. 33-01971
AND
AMENDMENT NO. 24
TO
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940
FILE NO. 811-04508
This Registration Statement comprises the following papers and contents:
The Facing Sheet
Cross-Reference Sheet
Part A-The Prospectus
Part B-The Statement of Additional Information
Copies of Annual Reports to Shareholders for the Nuveen
California Tax-Free Money Market Fund (the financial
statements from which are incorporated by reference into the
Statement of Additional Information)
Part C-Other Information
Signatures
Index to Exhibits
Exhibits
<PAGE>
NUVEEN CALIFORNIA TAX-FREE FUND, INC.
-----------------
CROSS REFERENCE SHEET
PART A--PROSPECTUS
<TABLE>
<CAPTION>
ITEM IN PART A
OF FORM N-1A PROSPECTUS LOCATION
- -------------- -------------------
<S> <C>
1 Cover Page Cover Page
2 Synopsis Fund Expenses; Highlights
3 Condensed Financial Information Financial Highlights
4 General Description of Registrant The Fund and its Investment Objective and
Policies
5 Management of the Fund Management of the Fund; General Information
6 Capital Stock and Other Securities General Information; Dividends and Taxes
7 Purchase of Securities Being Offered Management of the Fund; Net Asset Value;
How to Buy Fund Shares
8 Redemption or Repurchase How to Redeem Fund Shares
9 Pending Legal Proceedings Not Applicable
</TABLE>
<PAGE>
PART B--STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
ITEM IN PART B LOCATION IN STATEMENT
OF FORM N-1A OF ADDITIONAL INFORMATION
-------------- -------------------------
<S> <C>
10 Cover Page Cover Page
11 Table of Contents Cover Page
12 General Information and History Not Applicable
13 Investment Objectives and Fundamental Policies and Investment
Policies Portfolio
14 Management of the Fund Management
15 Control Persons and Principal Management
Holders of Securities
16 Investment Advisory and Other Investment Adviser and Investment
Services Management Agreement; Distribution and
Service Plan; Independent Public
Accountants and Custodian
17 Brokerage Allocation and Other Portfolio Transactions
Practices
18 Capital Stock and Other See "General Information" in the Prospectus
Securities
19 Purchase, Redemption and Additional Information on the Purchase and
Pricing of Securities Redemption of Fund Shares; Distribution and
Service Plan; Net Asset Value
20 Tax Status Tax Matters
21 Underwriters Additional Information on the Purchase and
Redemption of Fund Shares; See "How to Buy
Fund Shares" and "Management of the Funds"
in the Prospectus
22 Calculation of Performance Data Performance Information
23 Financial Statements Incorporated by Reference to Annual Report
to Shareholders
</TABLE>
<PAGE>
PART A--PROSPECTUS
NUVEEN CALIFORNIA TAX-FREE FUND, INC.
333 West Wacker Drive
Chicago, Illinois 60606
<PAGE>
[NUVEEN LOGO]
Money Market
Funds
June 24, 1998
Prospectus
Dependable, tax-free income
to help you keep more of
what you earn.
[PHOTO APPEARS HERE]
California
<PAGE>
NUVEEN CALIFORNIA TAX-FREE FUND, INC.
Nuveen California Tax-Free Money Market Fund
JUNE 24, 1998
PROSPECTUS
Nuveen California Tax-Free Fund, Inc. is an open-end,
diversified management investment company presently
offering shares in one investment portfolio, the
Nuveen California Tax-Free Money Market Fund (the
"Fund" or the "Money Market Fund").
The Money Market Fund has the objective of providing,
through investment in a professionally managed port-
folio of California Municipal Obligations, as high a
level of current interest income exempt from both
federal and California income taxes as is consistent
with its investment policies and with preservation of
capital.
The Money Market Fund invests primarily in high qual-
ity short-term California tax-exempt money market
instruments. The Fund seeks to maintain its net asset
value at $1.00 per share. The Fund has adopted plans
applicable to shares of the Fund sold through banks
or securities dealers whereby certain of the costs of
administration and/or distribution with respect to
such shares will be borne by the Fund and allocated
to the shares that are subject to those plans.
This Prospectus, which should be retained for future
reference, sets forth concisely the information about
the Fund that a prospective investor should know
before investing in the Fund. A "Statement of Addi-
tional Information" dated June 24, 1998, containing
additional information about the Fund has been filed
with the Securities and Exchange Commission and is
incorporated by reference into this Prospectus. A
copy of this Statement may be obtained without charge
by writing to Nuveen California Tax-Free Fund, Inc.
or by calling John Nuveen & Co. Incorporated at the
toll-free number provided below.
An investment in the Fund is neither insured nor
guaranteed by the U.S. Government and there can be no
assurance that the Fund will be able to maintain a
stable net asset value of $1.00 per share.
Shares of the Fund are not deposits or obligations
of, or guaranteed or endorsed by, any bank and are
not federally insured by the Federal Deposit Insur-
ance Corporation, the Federal Reserve Board, or any
other agency.
The Fund may invest a significant percentage of its
assets in the securities of a single issuer, and,
therefore, an investment in the Fund may be riskier
than an investment in other types of money market
funds.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAP-
PROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION NOR HAS THE SECURI-
TIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
John Nuveen & Co. Incorporated
For information, call toll-free (800) 858-4084
---
1
<PAGE>
Contents
<TABLE>
<C> <S>
2 Fund Expenses
3 Highlights
4 Financial Highlights
5 Yield
5 The Fund and Its Investment
Objective and Policies
8 Management of the Fund
8 Dividends and Taxes
10 Net Asset Value
10 How to Buy Fund Shares
13 How to Redeem Fund Shares
15 General Information
16 Taxable Equivalent Yield Tables
</TABLE>
Fund Expenses
The following tables illustrate all expenses and fees that a shareholder of a
series of the Fund will incur. The expenses and fees shown are for the fiscal
year ended February 28, 1998.
<TABLE>
<CAPTION>
INSTITUTIONAL DISTRIBUTION SERVICE
SHAREHOLDER TRANSACTION EXPENSES SERIES PLAN SERIES PLAN SERIES
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Sales charges imposed on purchases None None None
Sales charges imposed on reinvested
dividends None None None
Redemption fees None None None
Exchange fees None None None
</TABLE>
<TABLE>
<CAPTION>
ANNUAL OPERATING EXPENSES
(AS A PERCENTAGE OF INSTITUTIONAL DISTRIBUTION SERVICE
AVERAGE DAILY NET ASSETS) SERIES PLAN SERIES PLAN SERIES
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Management fees .40% .40% .40%
12b-1 Fees (or service fees) None .12% .10%
Other operating expenses, after expense
reimbursements .07% .03% .05%
- -------------------------------------------------------------------------------
Total expenses, after expense
reimbursements .47% .55% .55%
- -------------------------------------------------------------------------------
</TABLE>
The following example illustrates the expenses that you would pay on a $1,000
investment over various time periods assuming (1) a 5% annual rate of return
and (2) redemption at the end of each time period. As noted in the table above,
the Fund charges no redemption fees of any kind.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional series $ 5 $15 $26 $59
Distribution and Service Plan series $ 6 $18 $31 $69
- ---------------------------------------------------------------------
</TABLE>
This example should not be considered a representation of past or future
expenses or performance. Actual expenses may be greater or less than those
shown. This example assumes that the percentage amounts listed under Annual
Operating Expenses remain the same in each of the periods.
The purpose of the foregoing tables is to help you understand all expenses and
fees that you would bear directly or indirectly as an investor in the Fund.
As discussed under "Management of the Fund" and reflected in the tables above,
the management fee is reduced or Nuveen Advisory assumes certain expenses in
amounts necessary to prevent the total expenses of each series of the Fund in
any fiscal year from exceeding .55 of 1% of the average daily net asset value
of the series. Without expense reimbursements, for the fiscal year ended Febru-
ary 28, 1998, other operating expenses would have been .07, .14 and .08 of 1%,
and total expenses would have been .47, .66 and .58 of 1% of the average daily
net assets of the Institutional series, the Distribution Plan series and the
Service Plan series, respectively, of the Fund. See "Management of the Fund."
---
2
<PAGE>
Highlights
Nuveen California Tax-Free Fund, Inc. is an open-end, diversified management
investment company that currently offers shares in one investment portfolio,
the Nuveen California Tax-Free Money Market Fund (the "Fund").
The Fund has the objective of providing, through investment in a professionally
managed portfolio of California Municipal Obligations, as high a level of cur-
rent interest income exempt both from federal and California income taxes as is
consistent with its investment policies and with preservation of capital. The
Fund invests primarily in high quality short-term California tax-exempt instru-
ments and seeks to maintain a net asset value of $1.00 per share. There is no
guarantee that this value will be maintained or that the objective of the Fund
will be realized. See "Net Asset Value" on page 10, "The Fund and its Invest-
ment Objective and Policies" on page 5.
The Fund intends to qualify, as it has in prior years, for tax treatment as a
regulated investment company and to satisfy conditions that will enable inter-
est income that is exempt from federal and California income taxes in the hands
of the Fund to retain such tax-exempt status when distributed to the sharehold-
ers. See "Dividends and Taxes--Tax Matters" on page 9.
HOW TO BUY FUND SHARES
Shares of the Fund may be purchased on days on which the Federal Reserve Bank
of Boston is normally open for business ("business days") at the net asset
value next determined after an order is received together with payment in fed-
eral funds. The minimum initial investment for purchases of shares of the Fund
is $5,000 and subsequent purchases must be in amounts of $100 or more. See "How
to Buy Fund Shares" on page 10. For further information about the Fund, please
call Nuveen toll-free at (800) 858-4084.
HOW TO REDEEM FUND SHARES
Shareholders may redeem shares at the net asset value next computed after
receipt of a redemption request in proper form on any business day. Sharehold-
ers may make redemption requests in writing or, for shareholders of the Distri-
bution Plan series, by check. Shareholders who have completed and filed the
necessary authorization form may make redemption requests by telephone with
proceeds to be transferred by wire to a predesignated bank account or by check
to the address of record. A fee may be charged for wire redemption. See "How to
Redeem Fund Shares" on page 13.
DIVIDENDS AND REINVESTMENT
All of the net income of the Fund is declared daily as a dividend on shares
entitled to such dividend. The Fund will distribute its dividends monthly. Dis-
tributions will be made in the form of additional shares of the Fund or, at the
option of the shareholder, in cash. See "Dividends and Taxes" on page 8.
INVESTMENT ADVISER AND PRINCIPAL UNDERWRITER
John Nuveen & Co. Incorporated ("Nuveen") will act as principal underwriter of
the Fund's shares. The Fund has adopted Distribution and Service Plans under
which qualifying organizations may be paid a fee for servicing shareholder
accounts. A portion of the fees paid under these Plans is charged to the Dis-
tribution Plan and Service Plan series of shares of the Fund. See "How to Buy
Fund Shares--Distribution and Service Plan" on page 13. Nuveen Advisory Corp.
("Nuveen Advisory"), a wholly-owned subsidiary of Nuveen, is the Fund's invest-
ment adviser and receives annual fees based upon the average daily net assets
of the Fund. See "Management of the Fund" on page 8.
INVESTMENTS
The Fund will invest primarily in California Municipal Obligations having rat-
ings or other credit and risk characteristics as described on pages 5-8, the
income on which is exempt from federal and California income taxes. In addi-
tion, as described below, the Fund may purchase, but to date has not purchased
and has no present intention to purchase, taxable "temporary investments," lim-
ited to obligations issued or guaranteed by the full faith and credit of the
United States, or certificates of deposit issued by U.S. banks with assets of
at least $1 billion, or "high grade" commercial paper or corporate notes, bonds
or debentures, with a remaining maturity of 397 days or less, or repurchase
agreements in respect of any of the foregoing with selected dealers, U.S. banks
or other recognized financial institutions, subject to the specific limitations
stated below. The Fund may from time to time invest a portion of its assets in
debt obligations which are not rated, and in variable rate or floating rate
obligations. Investors are urged to read the descriptions of these investments
and practices set forth in this Prospectus. See "The Fund and its Investment
Objective and Policies" on page 5.
The information set forth above should be read in conjunction with the detailed
information set forth elsewhere in this Prospectus.
---
3
<PAGE>
Financial Highlights
The following financial information has been derived from Nuveen California
Tax-Free Fund, Inc.'s financial statements, which have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their report
appearing in the Fund's Annual Report, and should be read in conjunction with
the financial statements and related notes appearing in the Annual Report.
Selected data for a common share outstanding throughout each period is as fol-
lows:
<TABLE>
<CAPTION>
OPERATING PERFORMANCE LESS DISTRIBUTIONS
----------------------- ------------------------
NET
REALIZED AND DIVIDENDS NET TOTAL
NET ASSET UNREALIZED FROM TAX- ASSET RETURN
VALUE NET GAIN (LOSS) EXEMPT NET DISTRIBUTIONS VALUE ON NET
BEGINNING INVESTMENT FROM INVESTMENT FROM CAPITAL END OF ASSET
OF PERIOD INCOME(A) INVESTMENTS INCOME GAINS PERIOD VALUE(B)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CALIFORNIA**
- ------------------------------------------------------------------------------------------------------
YEAR ENDED
FEBRUARY 28/29
1998
Service Plan series $ 1.00 $ .03 $ -- $ (.03) $ -- $ 1.00 3.13%
Distribution Plan series 1.00 .03 -- (.03) -- 1.00 3.13
Institutional series 1.00 .03 -- (.03) -- 1.00 3.22
1997
Service Plan series 1.00 .03 -- (.03) -- 1.00 2.94
Distribution Plan series 1.00 .03 -- (.03) -- 1.00 2.94
Institutional series 1.00 .03 -- (.03) -- 1.00 3.02
1996
Service Plan series 1.00 .03 -- (.03) -- 1.00 3.32
Distribution Plan series 1.00 .03 -- (.03) -- 1.00 3.31
Institutional series 1.00 .03 -- (.03) -- 1.00 3.40
1995
Service Plan series 1.00 .03 -- (.03) -- 1.00 2.59
Distribution Plan series 1.00 .03 -- (.03) -- 1.00 2.60
Institutional series 1.00 .03 -- (.03) -- 1.00 2.69
1994
Service Plan series 1.00 .02 -- (.02) -- 1.00 1.94
Distribution Plan series 1.00 .02 -- (.02) -- 1.00 1.92
Institutional series 1.00 .02 -- (.02) -- 1.00 2.07
1993
Service Plan series 1.00 .02 -- (.02) -- 1.00 2.28
Distribution Plan series 1.00 .02 -- (.02) -- 1.00 2.29
Institutional series 1.00 .02 -- (.02) -- 1.00 2.36
1992(C)
Service Plan series 1.00 .02 -- (.02) -- 1.00 2.39
Distribution Plan series 1.00 .02 -- (.02) -- 1.00 2.39
Institutional series 1.00 .03 -- (.03) -- 1.00 2.45
1991(D)
Service Plan series 1.00 .05 -- (.05) -- 1.00 4.70
Distribution Plan series 1.00 .05 -- (.05) -- 1.00 4.70
Institutional series 1.00 .05 -- (.05) -- 1.00 4.80
1990(E) 1.00 .05 -- (.05) -- 1.00 5.37
1989(E) 1.00 .06 -- (.06) -- 1.00 5.62
- ------------------------------------------------------------------------------------------------------
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
------------------------------------------------------------------------
RATIO OF NET RATIO OF NET
RATIO OF INVESTMENT RATIO OF INVESTMENT
NET ASSETS EXPENSES TO INCOME TO EXPENSES TO INCOME TO
END OF AVERAGE NET AVERAGE NET AVERAGE NET AVERAGE NET
PERIOD (IN ASSETS BEFORE ASSETS BEFORE ASSETS AFTER ASSETS AFTER
THOUSANDS) REIMBURSEMENT REIMBURSEMENT REIMBURSEMENT(A) REIMBURSEMENT(A)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CALIFORNIA**
- ------------------------------------------------------------------------------------------------------
YEAR ENDED
FEBRUARY 28/29
1998
Service Plan series $ 86,916 .58% 3.09% .55% 3.12%
Distribution Plan series 54,789 .66 3.02 .55 3.13
Institutional series 18,791 .47 3.22 .47 3.22
1997
Service Plan series 95,306 .59 2.89 .55 2.93
Distribution Plan series 57,490 .61 2.87 .55 2.93
Institutional series 32,843 .46 3.01 .46 3.01
1996
Service Plan series 70,722 .56 3.28 .54 3.30
Distribution Plan series 73,020 .62 3.23 .55 3.30
Institutional series 34,392 .46 3.39 .46 3.39
1995
Service Plan series 41,772 .59 2.15 .55 2.19
Distribution Plan series 67,157 .64 2.47 .55 2.56
Institutional series 50,772 .47 2.74 .47 2.74
1994
Service Plan series 415,238 .53 1.94 .53 1.94
Distribution Plan series 72,380 .73 1.74 .55 1.92
Institutional series 32,299 .41 2.06 .41 2.06
1993
Service Plan series 469,812 .57 2.24 .55 2.26
Distribution Plan series 80,652 .62 2.19 .55 2.26
Institutional series 24,156 .47 2.33 .47 2.33
1992(C)
Service Plan series 478,886 .56* 3.53* .55* 3.54*
Distribution Plan series 91,670 .61* 3.48* .55* 3.54*
Institutional series 18,334 .45* 3.64* .45* 3.64*
1991(D)
Service Plan series 431,590 .57 4.65 .55 4.67
Distribution Plan series 90,031 .61 4.61 .55 4.67
Institutional series 22,342 .45 4.77 .45 4.77
1990(E) 452,465 .59 5.34 .55 5.38
1989(E) 362,927 .57 5.68 .55 5.70
- ------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
**Effective for the fiscal year ended June 30, 1991, and thereafter, the Fund
has presented the per share data by series.
(a) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory.
(b) Total returns are calculated on net asset value and are not annualized.
(c) For the eight months ended February 29.
(d) For the fiscal year ended June 30.
(e) For the fiscal year ended June 30, represents combined per share data and
ratios for the Service Plan, Distribution Plan and Institutional Series.
---
4
<PAGE>
Yield
From time to time, Nuveen California Tax-Free Fund, Inc. may advertise the
"yield," "effective yield" and "taxable equivalent yield" of the various series
of its Fund. The "yield" of a series refers to the rate of income generated by
an investment in the series over a specified seven-day period, expressed as an
annualized figure. "Effective yield" is calculated similarly except that, when
annualized, the income earned by the investment is assumed to be reinvested.
Due to this compounding effect, the effective yield will be slightly higher
than the yield. "Taxable equivalent yield" is the yield that a taxable invest-
ment would need to generate in order to equal the series' yield on an after-tax
basis for an investor in a stated tax bracket (often the bracket with the high-
est marginal tax rate). A taxable equivalent yield quotation for a given series
will be higher than the yield or the effective yield quotations for the series.
The yield figures for the various series of the Fund will fluctuate over time.
Based on the seven-day period ended February 28, 1998, the yield, effective
yield and taxable equivalent yield (using a combined federal and California
income tax rate of 45.2%) for the Fund were as follows:
<TABLE>
<CAPTION>
TAXABLE
CURRENT EFFECTIVE EQUIVALENT
YIELD YIELD YIELD
- --------------------------------------------------
<S> <C> <C> <C>
Distribution and
Service Plan series 3.03% 3.08% 5.53%
Institutional series 3.14% 3.19% 5.73%
- --------------------------------------------------
</TABLE>
This Prospectus may be in use for a full year and it can be expected that dur-
ing this period there will be material fluctuations in yield from that quoted
above. For information as to current yields, please call Nuveen at (800) 858-
4084.
A comparison of tax-exempt and taxable equivalent yields is one element to con-
sider in making an investment decision. Nuveen California Tax-Free Fund, Inc.
may from time to time in its advertising and sales materials compare the then
current yield as of the most recent quarter of the Fund with the yield on tax-
able investments such as corporate or U.S. Government bonds, bank CDs and money
market accounts or money market funds, each of which has investment character-
istics that may differ from those of the Fund. U.S. Government bonds, for exam-
ple, are backed by the full faith and credit of the U.S. Government, and bank
CDs and money market accounts are insured by an agency of the federal govern-
ment. Bank money market accounts and money market funds provide stability of
principal, but pay interest at rates that vary with the condition of the short-
term taxable debt market. The investment characteristics of the Fund are
described more fully elsewhere in this Prospectus.
Any given performance quotation or performance comparison for the Fund is based
on historical earnings and should not be considered as representative of the
performance of the Fund for any future period. Additional information concern-
ing the Fund's performance appears in the Statement of Additional Information.
The Fund and Its Investment Objective and Policies
INVESTMENT OBJECTIVE
Nuveen California Tax-Free Fund, Inc. is an open-end, diversified management
investment company that currently offers shares in one investment portfolio,
the Nuveen California Tax-Free Money Market Fund. The Fund has the objective of
providing, through investment in a professionally managed portfolio of Califor-
nia Municipal Obligations (described below), as high a level of current inter-
est income exempt from both federal and California income taxes as is
consistent with its investment policies and with preservation of capital. The
Fund's investment objective is a fundamental policy of the Fund and may not be
changed without the approval of the holders of a majority of the shares of the
Fund. The Fund values its portfolio securities at amortized cost and seeks to
maintain a constant net asset value of $1.00 per share. There is risk in all
investments and, therefore, there can be no assurance that the objective of the
Fund will be achieved.
INVESTMENT POLICIES
The Fund will, as a fundamental policy, pursue its investment objective by
investing at least 80% of its investment assets in California Municipal Obliga-
tions except during temporary defensive periods. The Fund intends to remain as
fully invested in California Municipal Obligations as is prudent or practical
under the circumstances.
The Fund's investment assets will consist primarily of short-term California
Municipal Obligations which at the time of purchase are eligible for purchase
by money market funds under applicable guidelines of the Securities and
Exchange Commission ("SEC"), and are: (1) highly rated by nationally recognized
statistical rating organizations; or (2) unrated but which, in the opinion of
Nuveen Advisory, have credit characteristics equivalent to the foregoing and
are deemed to be of "high quality" by Nuveen Advisory. To the extent that
unrated Municipal Obligations may be less liquid, there may be somewhat greater
risk in purchasing unrated Municipal Obligations than in purchasing comparable
but rated Municipal Obligations. The investment portfolio of the Fund will be
limited to obligations maturing within 397 days from the date of acquisition or
which have variable or floating rates of interest, and the Fund will maintain a
dollar-weighted average portfolio maturity of not more than 90 days. During the
fiscal year ended February 28, 1998, the average maturity of the Fund's portfo-
lio ranged from 16 to 48 days. The Fund generally intends to hold securities to
maturity rather than to engage in portfolio trading. However, reflecting the
short-term maturities of
---
5
<PAGE>
the investments of the Fund, the annual portfolio turnover rate will be rela-
tively high.
The types of short-term California Municipal Obligations in which the Fund may
invest include bond anticipation notes, tax anticipation notes, revenue antici-
pation notes, construction loan notes and bank notes issued by governmental
authorities to commercial banks as evidence of borrowings. Since these short-
term securities frequently serve as interim financing pending receipt of antic-
ipated funds from the issuance of long-term bonds, tax collections, or other
anticipated future revenues, a weakness in an issuer's ability to obtain such
funds as anticipated could adversely affect the issuer's ability to meet its
obligations on these short-term securities.
The Fund may also invest in variable and floating rate instruments even if they
carry stated maturities in excess of 397 days, upon certain conditions con-
tained in rules and regulations issued by the SEC under the Investment Company
Act of 1940, but will do so only if they carry demand features that meet the
conditions of applicable SEC rules and permit the Fund to redeem upon specified
notice at par. The Fund's right to obtain payment at par on a demand instrument
upon demand could be affected by events occurring between the date the Fund
elects to redeem the instrument and the date redemption proceeds are due which
affect the ability of the issuer to pay the instrument at par value.
Because the Fund invests in securities backed by banks and other financial
institutions, changes in the credit quality of these institutions could cause
losses to the Fund and affect its share price.
To help protect against such losses, the Fund has obtained from MBIA Insurance
Corp. a commitment to issue, subject to certain conditions and at the Fund's
request, insurance policies to cover certain Municipal Obligations held by the
Fund that are backed by a credit agreement from one of a number of banks previ-
ously approved by MBIA. If the bank were to deteriorate financially (under
standards set forth in MBIA's commitment), the Fund could elect to purchase
insurance on the underlying Municipal Obligation from MBIA, which would insure
payment of regularly scheduled principal of and interest on the Municipal Obli-
gation. Although this insurance would not guarantee the market value of the
Municipal Obligations or the value of Fund shares, the Fund believes that its
ability to obtain such insurance will enable the Fund to hold or sell these
securities at a price at or near their par value.
The Fund may purchase but to date has not purchased and has no present inten-
tion to purchase "temporary investments," the income from which is subject to
California income tax or to both federal and California income taxes. Under
ordinary circumstances, the Fund may not invest more than 20% of its investment
assets in such temporary investments. However, during extraordinary circum-
stances the Fund may, for defensive purposes, invest more than 20% of its net
assets in such temporary investments. The Fund may only invest in temporary
investments with remaining maturities of 397 days or less which, in the opinion
of Nuveen Advisory, are of "high grade" quality.
MUNICIPAL OBLIGATIONS
Municipal Obligations include debt obligations issued by states, cities and
local authorities to obtain funds for various public purposes, such as air-
ports, highways, housing, hospitals, mass transportation, water and sewer
works, and include industrial development bonds and pollution control bonds.
The two principal classifications of Municipal Obligations are "general obliga-
tion" and "revenue" bonds. General obligation bonds are secured by the issuer's
pledge of its full faith, credit and taxing power for the payment of principal
and interest. Revenue bonds are payable only from the revenues derived from a
particular facility or class of facilities or, in some cases, from the proceeds
of a special excise or other specific revenue source. Industrial development
and pollution control bonds are in most cases revenue bonds and do not gener-
ally constitute the pledge of the credit or taxing power of the issuer of such
bonds. There are, of course, variations in the security of Municipal Obliga-
tions, both within a particular classification and between classifications,
depending on numerous factors.
Notes are short-term instruments with a maturity of two years or less. Most
notes are general obligations of the issuer and are sold in anticipation of a
bond sale, collection of taxes or receipt of other revenues. Payment of these
notes is primarily dependent upon the issuer's receipt of the anticipated reve-
nues. Other notes include construction loan notes issued to provide construc-
tion financing for specific projects and bank notes issued by local
governmental bodies and agencies to commercial banks as evidence of borrowings.
Municipal Obligations also include very short-term unsecured, negotiable prom-
issory notes, issued by states, municipalities, and their agencies which are
known as "tax-exempt commercial paper" or "municipal commercial paper." Payment
of principal and interest on issues of municipal commercial paper may be made
from various sources, to the extent the funds are available therefrom. There is
a limited secondary market for issues of municipal commercial paper.
While these various types of notes as a group represent the major portion of
the tax-exempt note market, other types of notes are occasionally available in
the marketplace and the Fund may invest in such other types of notes to the
extent permitted under its investment policies and limitations. Such notes may
be issued for different purposes and with different security than those men-
tioned above.
The yields on Municipal Obligations are dependent on a variety of factors,
including the condition of the general money market and the Municipal Obliga-
tion market, the size of a particular offering, the maturity of the obligation
and the rating of the issue. The ratings of Moody's and S&P represent their
opinions as to the quality of the Municipal Obligations which they undertake to
rate. It should be emphasized, however, that ratings are general and are not
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6
<PAGE>
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.
CALIFORNIA MUNICIPAL OBLIGATIONS
The following information is a brief summary of special factors that affect the
risk of investing in California Municipal Obligations issued within that state.
This information was obtained from official statements of issuers located in
California as well as from other publicly available official documents and
statements and is not intended to be a complete description. The Fund has not
independently verified any of the information contained in these statements and
documents. Additional considerations relating to these risks are contained in
the Statement of Additional Information.
California Municipal Obligations are issued by the State of California and cit-
ies and local authorities in the State of California, and bear interest that,
in the opinion of bond counsel to the issuer, is exempt from federal and Cali-
fornia income taxes, although such interest may be subject to the Federal
alternative minimum tax. The Fund will invest primarily in California Municipal
Obligations that are issued by the State of California and cities and local
authorities in the State of California, except that the Fund may invest not
more than 10% of its net assets in Municipal Obligations issued by United
States possessions or territories, which also bear interest that is exempt from
regular Federal as well as California individual income taxes and are therefore
considered to be California Municipal Obligations for purposes of this Prospec-
tus.
Because the Fund will concentrate its investment in California Municipal Obli-
gations, it may be affected by political, economic or regulatory factors that
may impair the ability of California issuers to pay interest on or to repay the
principal of their debt obligations. As a result of "Proposition 13" and other
amendments to the California Constitution and the adoption of other statutes,
the authority of California governmental entities to raise taxes, fees and
other charges has been limited. In recent years California experienced substan-
tial financial difficulties related to the severe recession from 1990-93, which
hit particularly hard in Southern California. The recession caused substantial,
broad-based revenue shortfalls which affected both the state and local govern-
ments. California's economy has been in a steady recovery since the start of
1994. However, local governments in California continue to face difficult
financial conditions due to the limited financial flexibility accompanied with
the increasing costs of services.
California Municipal Obligations may be subject to greater price volatility
than Municipal Obligations in general as a result of the effect of supply and
demand for these securities, which in turn could cause greater volatility in
the value of the shares of the Fund. Additional considerations relating to the
risks of investing in California Municipal Obligations are presented in the
Statement of Additional Information.
Obligations of issuers of Municipal Obligations are subject to the provisions
of bankruptcy, insolvency and other laws affecting the rights and remedies of
creditors, such as the Federal Bankruptcy Reform Act of 1978. In addition, the
obligations of such issuers may become subject to the laws enacted in the
future by Congress or the California legislature or by referenda extending the
time for payment of principal and/or interest, or imposing other constraints
upon enforcement of such obligations or upon municipalities to levy taxes.
There is also the possibility that, as a result of legislation or other condi-
tions, the power or ability of any issuer to pay, when due, the principal of
and interest on its Municipal Obligations may be materially affected.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
The Fund may purchase and sell Municipal Obligations on a when-issued or
delayed delivery basis. When-issued and delayed delivery transactions arise
when securities are purchased or sold with payment and delivery beyond the reg-
ular settlement date. (When-issued transactions normally settle within 15-45
days.) On such transactions the payment obligation and the interest rate are
fixed at the time the buyer enters into the commitment to purchase. The commit-
ment to purchase securities on a when-issued or delayed delivery basis may
involve an element of risk because the value of the securities is subject to
market fluctuation, no interest accrues to the purchaser prior to settlement of
the transaction, and at the time of delivery the market value may be less than
cost.
CERTAIN FUNDAMENTAL INVESTMENT POLICIES
The Fund, as a fundamental policy, may not, without the approval of the holders
of a majority of the outstanding shares of the Fund, (1) invest more than 5% of
its total assets in securities of any one issuer, excluding the United States
government, its agencies and instrumentalities or to the investment of 25% of
the Fund's assets; (2) invest more than 5% of its total assets in securities of
unseasoned issuers which, together with their predecessors, have been in opera-
tion for less than three years; (3) invest more than 10% of its assets in
repurchase agreements maturing in more than seven days, "illiquid" securities
(such as non-negotiable CDs) and securities without readily available market
quotations; or (4) invest more than 25% of its total assets in securities of
issuers in any one industry, provided, however, that such limitation shall not
be applicable to municipal bonds issued by governments or political subdivi-
sions of governments, and obligations issued or guaranteed by the U.S. Govern-
ment, its agencies or instrumentalities. For purposes of the foregoing
sentence, the "issuer" of a security shall be deemed to be the entity whose
assets and revenues are committed to the payment of principal and interest on
such security, provided that the guarantee of an
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7
<PAGE>
instrument will be considered a separate security (subject to certain exclu-
sions allowed under the Investment Company Act of 1940). It is a fundamental
policy of the Fund, which cannot be changed without the approval of the holders
of a majority of shares of the Fund, that the Fund will not hold securities of
a single bank, including securities backed by a letter of credit of such bank,
if such holdings would exceed 10% of the total assets of the Fund.
For a more complete description of the investment restrictions summarized above
and the other investment restrictions applicable to the Fund, see the Statement
of Additional Information.
The investment policies of the Fund specifically identified as fundamental,
together with its investment objective, cannot be changed without approval by
holders of a "majority of the Fund's outstanding voting shares." As defined by
the Investment Company Act of 1940, this means the vote of (i) 67% or more of
the shares present at a meeting, if the holders of more than 50% of the shares
are present or represented by proxy or (ii) more than 50% of the shares, which-
ever is less.
Management of the Fund
The management of Nuveen California Tax-Free Fund, Inc., including general
supervision of the duties performed for the Money Market Fund by the investment
adviser under the Investment Management Agreement, is the responsibility of its
Board of Directors.
Nuveen Advisory, 333 West Wacker Drive, Chicago, Illinois 60606, acts as the
investment adviser for and manages the investment and reinvestment of the
assets of the Fund. Nuveen Advisory also administers Nuveen California Tax-Free
Fund, Inc.'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 offi-
cers of Nuveen California Tax-Free Fund, Inc. if elected to such positions.
For the services and facilities furnished by Nuveen Advisory, the Fund has
agreed to pay an annual management fee as follows:
<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSET
VALUE MANAGEMENT FEE
- ------------------------------------------
<S> <C>
For the first $500 million .400 of 1%
For the next $500 million .375 of 1%
For assets over $1 billion .350 of 1%
- ------------------------------------------
</TABLE>
All fees and expenses are accrued daily and deducted before payment of divi-
dends to investors. In addition to the management fee of Nuveen Advisory, the
Fund pays all other costs and expenses of its operations and Nuveen California
Tax-Free Fund, Inc.'s general administrative expenses. Included in the expenses
paid by the Fund and allocated to the Distribution Plan series and Service Plan
series are the payments made under the Distribution and Service Plans with
respect to those series (see "How to Buy Fund Shares--Distribution and Service
Plan").
The management fees will be reduced or Nuveen Advisory will assume certain
expenses of each series of the Fund in amounts necessary to prevent the total
expenses (including Nuveen Advisory's management fees and share of payments of
each of the Distribution Plan series and Service Plan series under the Distri-
bution and Service Plans, but excluding interest, taxes, fees incurred in
acquiring and disposing of portfolio securities and, to the extent permitted,
extraordinary expenses) of each series in any fiscal year from exceeding .55 of
1% of the series' average daily net assets. For the fiscal year ended February
28, 1998, management fees amounted to .40 of 1% of the average daily net assets
of the Fund. For the fiscal year ended February 28, 1998, net of applicable
expense reimbursements, total expenses amounted to .47, .55 and .55 of 1% of
the average daily net assets of the Institutional series, the Distribution Plan
series and the Service Plan series, respectively. Without expense reimburse-
ments, total expenses for the fiscal year ended February 28, 1998, would have
been .47, .66, and .58 of 1% of the average daily net assets of the Institu-
tional series, the Distribution Plan series and the Service Plan series,
respectively.
Nuveen Advisory currently serves as investment adviser to 42 open-end funds
(the "Nuveen Mutual Funds") and 52 exchange-traded municipal securities funds
(the "Nuveen Exchange-Traded Funds"). As of the date of this Prospectus, Nuveen
Advisory manages approximately $36 billion in assets held by the Nuveen Mutual
Funds and the Nuveen Exchange-Traded Funds.
Nuveen Advisory is a wholly-owned subsidiary of John Nuveen & Co. Incorporated
("Nuveen"), 333 West Wacker Drive, Chicago, Illinois 60606. Nuveen, the princi-
pal underwriter of the Fund's shares, is the sponsor of the Nuveen Tax-Exempt
Unit Trust and Nuveen Unit Trusts, registered unit investment trusts. It is
also the principal underwriter of the Nuveen Mutual Funds, and served as co-
managing underwriter for the shares of the Nuveen Exchange-Traded Funds. Over
1,000,000 individuals have invested to date in Nuveen's funds and unit trusts.
Founded in 1898, Nuveen is a subsidiary of The John Nuveen Company which, in
turn, is approximately 78% owned by The St. Paul Companies, Inc. ("St. Paul").
St. Paul is located in St. Paul, Minnesota, and is principally engaged in pro-
viding property-liability insurance through subsidiaries.
Dividends and Taxes
DIVIDENDS
All of the net income attributable to the respective series of the Fund is
declared on each calendar day as a dividend on shares entitled to such divi-
dend. Net income of each series consists of all interest income accrued and
discount earned on portfolio assets (adjusted for amortization of premium on
securities when required for federal income
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8
<PAGE>
tax purposes), plus or minus any realized short-term gains or losses on portfo-
lio instruments since the previous dividend declaration, less estimated
expenses incurred subsequent to the previous declaration. For the Distribution
Plan series and Service Plan series of the Fund, expenses will include, among
other things, payments to banks or other organizations and securities dealers
pursuant to Distribution Agreements and Service Agreements with Nuveen. See
"How to Buy Fund Shares--Distribution and Service Plan" on page 13 for addi-
tional information on these expenses. It is not expected that realized or
unrealized gains or losses on portfolio instruments will be a meaningful factor
in the computation of the net income of the Fund. Dividends are paid monthly
and are reinvested in additional shares of the series of the Fund on which the
dividends are declared at net asset value or, at the shareholder's option, paid
in cash. Net realized long-term capital gains, if any, will be paid not less
frequently than annually within 30 days of the end of the fiscal year of Nuveen
California Tax-Free Fund, Inc. and reinvested in additional shares of the
series of the Fund on which such gains are paid at net asset value unless the
shareholder has elected to receive capital gains in cash. The Fund does not
anticipate realizing any significant long-term capital gains or losses.
TAX MATTERS
The Fund intends to qualify, as it has in prior years, under Subchapter M of
the Internal Revenue Code of 1986, as amended (the "Code"), for tax treatment
as a regulated investment company. In order to qualify for treatment as a regu-
lated investment company, the Fund must satisfy certain requirements relating
to the sources of its income, diversification of its assets and distribution of
its income to shareholders. As a regulated investment company, the Fund will
not be subject to federal income tax on the portion of its net investment
income and net realized capital gains that is currently distributed to share-
holders. The Fund also intends to satisfy conditions which will enable interest
from Municipal Obligations that is exempt from federal income tax in the hands
of the Fund to retain such tax-exempt status when distributed to the sharehold-
ers of the Fund. The Fund also intends to qualify as a management company under
the California Revenue and Taxation Code, and intends to satisfy conditions
which will enable it to pay dividends that are exempt from California personal
income taxes ("California exempt-interest dividends"). Corporations subject to
California franchise tax that invest in the Fund may not be entitled to exclude
California exempt-interest dividends from income. The total amount of dividends
paid by the Fund with respect to any taxable year that may be treated as Cali-
fornia exempt-interest dividends cannot exceed the amount by which the interest
received by the Fund during the year on obligations, the interest on which
would be exempt from California personal income tax if such obligations were
held by individuals, exceeds the expenses of the Fund which would be disallowed
under California personal income tax law as allocable to tax exempt interest if
the Fund were an individual. Individual shareholders of the portfolios of
Nuveen California Tax-Free Fund, Inc. therefore should not incur any federal or
California personal income taxes on interest income derived from California
Municipal Obligations, whether such dividends are taken in cash or reinvested
in additional shares of a portfolio.
Distributions by the Fund of net income received, if any, from taxable tempo-
rary investments and net short-term capital gains, if any, realized by the Fund
will be taxable to shareholders as ordinary income. As long as the Fund quali-
fies as a regulated investment company under the Code, distributions to share-
holders will not qualify for the dividends received deduction for corporations.
If in any year the Fund should fail to qualify under Subchapter M for tax
treatment as a regulated investment company, the Fund would incur a regular
corporate federal income tax upon its taxable income for that year, and distri-
butions to shareholders would be taxable to shareholders as ordinary dividend
income for federal income tax purposes to the extent of the Fund's available
earnings and profits.
The Code provides that interest on indebtedness incurred or continued to pur-
chase or carry tax-free investments, such as shares of the Fund, is not deduct-
ible. Under rules used by the Internal Revenue Service for determining when
borrowed funds are considered used for the purpose of purchasing or carrying
particular assets, the purchase of shares may be considered to have been made
with borrowed funds even though such funds are not directly traceable to the
purchase of shares. Similarly, under California law interest on indebtedness
incurred or continued by a shareholder in connection with the purchase of
shares of the Fund will not be deductible for California personal income tax
purposes.
Tax-exempt income is taken into account in calculating the amount of social
security and railroad retirement benefits that may be subject to federal income
tax.
Because the Fund may invest in private activity bonds, the interest on which is
not federally tax-exempt to persons who are "substantial users" of the facili-
ties financed by such bonds or "related persons" of such "substantial users,"
the Fund may not be an appropriate investment for shareholders who are consid-
ered either a "substantial user" or a "related person" thereof. Such persons
should consult their tax advisers before investing in the Fund.
Although the Fund to date has not done so and has no present intention of doing
so, the Fund may also invest in private activity bonds the interest on which is
a specific item of tax preference for purposes of computing the alternative
minimum tax on corporations and individuals. This type of private activity bond
includes most industrial and housing revenue bonds. Shareholders whose tax lia-
bility is determined under the alternative minimum tax will be taxed on their
share of the Fund's exempt-interest dividends that were paid from income earned
on these bonds.
In addition, the alternative minimum taxable income for corporations is
increased by 75% of the difference between
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9
<PAGE>
an alternative measure of income ("adjusted current earnings") and the amount
otherwise determined to be alternative minimum taxable income. Interest on all
Municipal Obligations, and therefore all distributions by the Fund that would
otherwise be tax exempt, is included in calculating a corporation's adjusted
current earnings.
The Fund is required in certain circumstances to withhold 31% of taxable divi-
dends and certain other payments paid to non-corporate holders of shares who
have not furnished to the Fund their correct taxpayer identification number (in
the case of individuals, their social security number) and certain certifi-
cates, or who are otherwise subject to back-up withholding.
The foregoing is a general and abbreviated summary of the provisions of the
Code and Treasury Regulations and California income tax provisions presently in
effect as they directly govern the taxation of the Fund or its shareholders.
These provisions are subject to change by legislative or administrative action,
and any such change may be retroactive with respect to Fund transactions.
Shareholders are advised to consult their own tax advisers for more detailed
information concerning the taxation of the Fund and the federal, California and
local tax consequences to its shareholders.
Net Asset Value
Net asset value of the Fund's shares will be determined by The Chase Manhattan
Bank, the custodian of Nuveen California Tax-Free Fund, Inc., as of 12:00 noon
Eastern Time on each day on which the Federal Reserve Bank of Boston is nor-
mally open for business (a "business day") and as of 12:00 noon Eastern Time on
any other day during which there is a sufficient degree of trading in the port-
folio securities held by the Fund such that the current net asset value of the
Fund's shares might be materially affected by changes in the value of the secu-
rities held by the Fund. The net asset value per share of the Fund will be com-
puted by dividing the sum of the value of the portfolio securities held by the
Fund, plus cash or other assets, less liabilities, by the total number of
shares of the Fund outstanding at such time.
The Fund will seek to maintain a net asset value of $1.00 per share. In this
connection, the Fund values its portfolio securities on the basis of their
amortized cost. This method values a security at its cost on the date of pur-
chase and thereafter assumes a constant amortization to maturity of any dis-
count or premium, regardless of the impact of fluctuating interest rates on the
market value of the security. For a more complete description of the amortized
cost valuation method and its effect on existing and prospective shareholders
of the Fund, see the Statement of Additional Information. There can be no
assurance that the Fund will be able at all times to maintain a net asset value
of $1.00 per share.
How to Buy Fund Shares
IN GENERAL
Shares of the Fund may be purchased by residents of California on days on which
the Federal Reserve Bank of Boston is normally open for business at the net
asset value which is next computed after receipt of an order in proper form and
receipt of payment in federal funds.
Shares of the Fund are issued in three series: (i) the "Distribution Plan"
series intended for purchase by or through securities dealers that have entered
into Distribution Agreements with Nuveen with respect to the distribution of
shares of the Fund pursuant to a Distribution Plan adopted by the Fund, (ii) the
"Service Plan" series intended for purchase by or through banks and other
organizations ("service organizations") that have agreed to perform services for
their customers who are shareholders of this series of the Fund pursuant to a
Service Plan adopted by the Fund and (iii) the "Institutional" series intended
for purchase by trustees, bank trust departments, corporations and investment
bankers or advisers. The Distribution Plan was adopted by the Fund in accordance
with Rule 12b-1 under the 1940 Act which permits an investment company to
bear distribution expenses (as that term is construed by the Securities and
Exchange Commission) in connection with certain services provided by securities
dealers. The Service Plan, although not a Rule 12b-1 plan, is a comparable
agreement entered into with service organizations who provide certain adminis-
trative services. There are no sales charges on purchases of shares of any of
the three series of the Fund. Under the Distribution Plan and the Service Plan,
the Distribution Plan series and the Service Plan series of shares of the Fund
and Nuveen pay fees to securities dealers and service organizations for services
rendered in the distribution of shares of the Fund or the servicing of
shareholder accounts. Payment of these fees by the Service Plan series and the
Distribution Plan series will ordinarily result in a lower yield on shares of
these series as compared with shares of the Institutional series. These fees are
described below under the caption "Distribution and Service Plan" and in the
Statement of Additional Information. Nuveen may, in its discretion and from its
own resources, pay to organizations that satisfy certain criteria an additional
amount not to exceed .05 of 1% per year based on average assets of accounts
serviced by such organizations. Shares of the Service Plan series and the
Distribution Plan series enjoy certain exclusive voting rights on matters
related to the payment of fees by these two series. Except for the payment of
these fees and the special voting rights related thereto, shares of each of the
three series of the Fund are identical.
Purchases of shares of the Fund by Federal Reserve wire are recommended. Howev-
er, purchases may also be made by bank wire, Federal Reserve draft or check.
The minimum initial investment in the Fund is $5,000, and subsequent invest-
ments must be in amounts of $100 or more. The Fund reserves the right to reject
purchase orders and to waive or increase the minimum investment requirements.
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<PAGE>
In order to maximize the earnings on its assets, the Fund strives to be
invested as completely as practicable. The Fund is normally required to make
settlement in federal funds for securities purchased. Accordingly, orders for
shares of the Fund may be made and become effective on days on which the Fed-
eral Reserve Bank of Boston is normally open for business, as follows:
PURCHASE BY TELEPHONE
To open an account, call Nuveen toll-free at (800) 858-4084 to obtain an
account number, control number and instructions. Information needed to estab-
lish the account will be taken over the telephone. Federal funds should be
wired to:
(on or before August 10, 1998)
United Missouri Bank of Kansas City, N.A.
ABA # 101000695
Nuveen California Tax-Free Money Market Fund
Shareholder Account No. (see above)
Shareholder Account Name:
(after August 10, 1998)
Chase Manhattan Bank
ABA #021000021 DDA #323-096328
For: The Nuveen Funds
For [Nuveen Fund Name]
Please include your name and account number.
An Application Form should be completed promptly and mailed to Nuveen Califor-
nia Tax-Free Fund, Inc. Subsequent investments may be made by following the
same telephone order and wire transfer procedure.
If an order is received by Nuveen by 12:00 noon Eastern Time, and federal funds
are received by the bank on the same day by 3:00 p.m. Eastern Time, the order
is effective that day. If both the order and the federal funds are not received
by the times specified above, the order will become effective the following
business day.
PURCHASE BY MAIL
To open an account, complete the Application Form and mail it with a check or
Federal Reserve draft to Nuveen California Tax-Free Money Market Fund, P.O. Box
5330, Denver, Colorado 80217-5330 (if mailed before August 10, 1998) and to
Nuveen California Tax-Free Fund, Inc., P.O. Box 5186, Bowling Green Station,
New York, New York 10274-5186 (if mailed after August 10, 1998). Subsequent
investments may be made by mailing a check with the investor's account number
to the above address. The order becomes effective as soon as the check or draft
is converted to federal funds. This usually occurs one business day after
receipt, but may take longer.
FUND DIRECT--ELECTRONIC FUNDS TRANSFER
You can use Fund Direct to link your Fund account to your account at your bank
or other financial institution to enable you to send money electronically
between those accounts to perform a variety of account transactions. These
include purchases of shares by telephone, investments under a Systematic
Investment Plan, and sending dividends and distributions, redemption payments
or Systematic Withdrawal Plan payments directly to your bank account. To acti-
vate Fund Direct privileges, just complete the appropriate section of the
Account Application, or an Account Update Form. To obtain an Account Update
Form, call Nuveen at (800) 858-4084. Fund Direct privileges will apply to each
shareholder listed in the registration on your account as well as to your
Authorized Dealer representative of record unless you indicate otherwise in
writing. After you establish Fund Direct privileges for your account, any
change of bank account information must be made by signature-guaranteed
instructions to our Transfer Agent as described in "How to Redeem Fund Shares."
Purchases may be made by telephone only after your account has been estab-
lished. To purchase shares in amounts up to $250,000 through a telephone repre-
sentative, call our Transfer Agent at (800) 858-4084. The purchase payment will
be debited from your bank account.
PURCHASE THROUGH A SECURITIES DEALER OR SERVICE ORGANIZATION
To open an account through a bank or a securities broker or dealer ("service
organization"), investors should send money to that organization for transmis-
sion to Nuveen California Tax-Free Fund, Inc. and furnish it with the informa-
tion required in the Application Form. The Fund has Distribution and Service
Plans pursuant to which payments are made, in the case of the Distribution Plan
series to dealers who provide assistance in distributing shares of such series
of the Fund, and in the case of the Service Plan series to service organiza-
tions who provide assistance in servicing shareholder accounts of such series.
See "Distribution and Service Plan."
PURCHASE BY REINVESTMENT OF NUVEEN UNIT TRUST DISTRIBUTIONS
California resident unitholders of Nuveen Unit Trusts may purchase shares of
the Fund by automatically reinvesting distributions from their Nuveen Unit
Trust. To obtain information on share purchases through investment of Nuveen
Unit Trust distributions, check the applicable box on the enclosed Application
Form or call Nuveen toll-free at (800) 237-0910.
COMMENCEMENT OF DIVIDENDS
Shares of the Fund are deemed to have been purchased when an order becomes
effective and are entitled to income commencing on the day the order becomes
effective.
THE FUND OFFERS TWO DIFFERENT TYPES OF SYSTEMATIC INVESTMENT PROGRAMS
SYSTEMATIC INVESTMENT PLAN
Once you have established a Fund account, you may make regular investments in
an amount of $50 or more each month by authorizing our Transfer Agent to draw
preauthorized checks on your bank account. There is no obliga-
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11
<PAGE>
tion to continue payments and you may terminate your participation at any time
at your discretion. No charge is made in connection with this Plan, and there
is no cost to the Fund. To obtain an Account Update Form which you can use to
initiate a Systematic Investment Plan, call Nuveen toll-free at (800) 858-4084.
PAYROLL DIRECT DEPOSIT PLAN
Once you have established a Fund account, you may, with your employer's con-
sent, make regular investments in Fund shares of $50 or more per month by
authorizing your employer to deduct such amount automatically from your pay-
check. There is no obligation to continue payments and you may terminate your
participation at any time at your discretion. No charge is made for this serv-
ice and there is no cost to the Fund. To obtain an application form for the
Payroll Direct Deposit Plan, check the applicable box on the enclosed Applica-
tion Form or call Nuveen toll-free at (800) 858-4084.
OTHER SHAREHOLDER PROGRAMS
EXCHANGE PRIVILEGES
You may exchange shares of the Fund for the appropriate class of shares of any
other Nuveen open-end fund with reciprocal exchange privileges, (the "Nuveen
Funds") into an identically registered account, provided that the Nuveen Fund
into which shares are to be exchanged is offered in your state of residence and
that the shares to be exchanged have been held by you for a period of at least
15 days. You may exchange Fund shares by calling (800) 858-4084 or by mailing
your written request to our Transfer Agent. Shares of Nuveen Funds 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 not exchange 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 other Nuveen Fund without a front-end sales charge. Exchanges of shares
with respect to which no front-end sales charge has been paid will be made at
the public offering price, which may include a front-end sales charge, unless a
front-end sales charge has previously been paid on the investment represented
by the exchanged shares (i.e., the shares to be exchanged were originally
issued in exchange for shares on which a front-end sales charge was paid), in
which case the exchange will be made at net asset value. Because certain other
Nuveen Funds may determine net asset value and therefore honor purchase or
redemption requests on days when the Fund does not (generally, Martin Luther
King's Birthday, Columbus Day and Veterans Day), exchanges of shares of one of
those funds for shares of the Fund may not be effected on such days.
The total value of shares being exchanged must at least equal the minimum
investment requirement of the Nuveen Fund into which they are being exchanged.
Exchanges are made based on the relative dollar values of the shares involved
in the exchange, and will be effected by redemption of shares of the Nuveen
Fund held and purchase of the shares of the other Nuveen Fund. For federal
income tax purposes, any such exchange constitutes a sale and purchase of
shares and may result in capital gain or loss. Before exercising any exchange,
you should obtain the Prospectus for the Nuveen Fund into which shares are to
be exchanged and read it carefully. If the registration of the account for the
Fund you are purchasing is not exactly the same as that of the fund account
from which the exchange is made, written instructions from all holders of the
account from which the exchange is being made must be received, with signatures
guaranteed by a member of an approved Medallion Guarantee Program or in such
other manner as may be acceptable to the Fund. The exchange privilege may be
modified or discontinued at any time. If you do not wish to have telephone
exchange privileges, you must indicate this in the "Telephone Services" section
of your Account Application or otherwise notify the Fund in writing of your
desire.
ADDITIONAL INFORMATION
An account will be maintained for each shareholder of record in the Fund by our
Transfer Agent, the Fund's transfer agent. Share certificates will be issued
only upon written request of the shareholder to our Transfer Agent. No certifi-
cates are issued for fractional shares. The Fund reserves the right to reject
any purchase order and to waive or increase minimum investment requirements.
A change in registration or transfer of shares held in the name of 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
the shareholder service agent's sub-accounting system to minimize their inter-
nal recordkeeping requirements. A broker/dealer or other investor requesting
shareholder servicing or accounting other than the master account or sub-
accounting service offered by the Fund will be required to enter into a sepa-
rate agreement with the agent for these services for a fee to be determined in
accordance with the level of services to be furnished.
The Fund has authorized one or more brokers to accept on its behalf purchase
and redemption orders. Such brokers are authorized to designate other interme-
diaries to accept purchase and redemption orders on the Fund's behalf. The Fund
will be deemed to have received a purchase or redemption order when an autho-
rized broker or, if applicable, a broker's authorized designee accepts the
order. Customer orders received by such broker (or their designee) will be
priced at the Fund's net asset value next computed after they are accepted by
an authorized broker (or their designee). Orders accepted by an authorized bro-
ker (or their designee) before the close of regular trading on
---
12
<PAGE>
the New York Stock Exchange will receive that day's share price; orders
accepted after the close of trading will receive the next business day's share
price.
Subject to the rules and regulations of the SEC, the Fund reserves the right to
suspend the continuous offering of its shares at any time, but such suspension
shall not affect the
shareholder's right of redemption as described in "How to Redeem Fund Shares"
below.
DISTRIBUTION AND SERVICE PLAN
The Fund has adopted a Distribution Plan pursuant to Rule 12b-1 under the 1940
Act and a Service Plan (collectively, the "Plan"), pursuant to which the Dis-
tribution Plan series and the Service Plan series of the Fund and Nuveen pay
fees in equal amounts to securities dealers and Service Organizations for serv-
ices rendered in the distribution of shares of the Fund or the servicing of
shareholder accounts. These services may include, among other things, estab-
lishing and maintaining shareholder accounts, processing purchase and redemp-
tion transactions, arranging for bank wires, performing sub-accounting,
answering shareholder inquiries and such other services as Nuveen may request.
Nuveen will enter into Distribution or Service Agreements with organizations
who render such services. Service payments to such organizations in amounts of
up to .25 of 1% per year of average assets of serviced accounts will be paid
one-half by the respective series of the Fund and one-half by Nuveen.
The Plan continues in effect from year to year as long as its continuance is
approved at least annually by a vote of the Board of Directors and a vote of
the non-interested directors of Nuveen California Tax-Free Fund, Inc. The Plan
may not be amended to increase materially the cost which the Distribution Plan
series or the Service Plan series of the Fund may bear for distribution and
services, respectively, without the approval of the non-interested directors
and the shareholders of the affected series of that Fund. Any other material
amendments of the Plan must be approved by the non-interested directors. Bene-
ficial owners of shares of the Distribution Plan series and the Service Plan
series should read this Prospectus in light of the terms governing their
accounts with securities dealers and service organizations, respectively.
How to Redeem Fund Shares
IN GENERAL
Upon receipt of a proper redemption request on a business day, the Fund will
redeem its shares at their next determined net asset value. You may use the
telephone redemption, check redemption, or the regular redemption procedures
discussed hereafter. The purchase and redemption methods employed will deter-
mine when funds will be available to you. Where the shares to be redeemed have
been purchased by check or through Fund Direct within 15 days prior to the date
the redemption request is received, the Fund will not send the redemption pro-
ceeds until the check or Fund Direct transfer for the purchase has cleared,
which may take up to 15 days. There is no delay when the shares being redeemed
were purchased by wiring federal funds.
CHECK REDEMPTION
Shareholders of the Distribution Plan series of the Fund may request that the
Fund provide them with drafts ("Redemption Checks") drawn on the Fund's
account. These Redemption Checks may be made payable to the order of any person
in an amount of $500 or more, and dividends are earned until the Redemption
Check clears. Redemption Checks clear through the United Missouri Bank of Kan-
sas City, N.A. (the "Bank") and are subject to the same rules and regulations
that the Bank applies to checking accounts.
When a Redemption Check is presented, a sufficient number of full and frac-
tional shares in the shareholder's account will be redeemed to cover the amount
of the Redemption Check. Shares for which stock certificates have been issued
will not be available for redemption by the use of Redemption Checks. There
must be sufficient shares in the shareholder's account to cover the amount of
each Redemption Check written or the check will be returned. Checks should not
be used to close an account. Shareholders wishing to use Redemption Checks must
complete the appropriate section of the Application Form and submit the
enclosed signature card.
This check redemption privilege may be modified or terminated at any time by
the Fund or the Bank. The check redemption feature does not constitute a bank
checking account.
BY WRITTEN REQUEST
You may redeem shares by sending a written request for redemption directly to
the Nuveen California Tax-Free Money Market Fund, c/o Shareholder Services,
Inc., P.O. Box 5330, Denver, CO 80217-5330 (if mailed before August 10, 1998)
and to the Fund, c/o Nuveen Investor Services, P.O. Box 5186, Bowling Green,
New York, New York 10274-5186 (if mailed after August 10, 1998), accompanied by
duly endorsed certificates, if issued. Requests for redemption and share cer-
tificates, if issued, must be signed by each shareholder and, if the redemption
proceeds exceed $50,000 or are payable other than to the shareholder of record
at the address of record (which address may not have been changed in the pre-
ceding 30 days), the signature must be guaranteed by a member of an approved
Medallion Guarantee Program or in such other manner as may be acceptable to the
Fund. Under normal circumstances payment will be made by check and mailed
within one business day (and in no event more than seven days) after receipt of
a redemption request in proper form.
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13
<PAGE>
TELEPHONE REDEMPTION BY CHECK
Unless you have declined telephone privileges, you may sell Fund shares by
calling (800) 858-4084. Your telephone redemption must not exceed $50,000 and
you may not redeem by telephone shares held in certificate form. While you or
anyone authorized by you may make telephone redemption requests, redemption
checks will be issued only in the name of the shareholder of record and will be
mailed to the address of record. If your telephone request is received prior to
4:00 p.m. Eastern Time, the shares to be redeemed earn income on the day the
request is made, and the redemption will be effected and the redemption check
will be mailed on the following business day. For requests received after 4:00
p.m. Eastern Time, the shares to be redeemed earn income through the following
business day, and the redemption is effected and the redemption check will be
mailed on the second business day.
Nuveen, the Transfer Agent or the Fund will be liable for losses resulting from
unauthorized telephone redemptions only if they do not follow reasonable proce-
dures designed to verify the identity of the caller. You should immediately
verify your trade confirmations when you receive them. Telephone redemptions
will not be honored for 30 days after the address on your account has changed.
TELEPHONE REDEMPTION VIA FUND DIRECT
To redeem shares held in non-certificate form by telephone with the redemption
proceeds paid via Fund Direct-Electronic Funds Transfer, you must complete the
Telephone Services section of the enclosed Application Form and return it to
Nuveen or our Transfer Agent. If you did not authorize Telephone Redemption via
Fund Direct when you opened your account, you may do so by sending a written
request to the Fund signed by each account owner with signatures guaranteed by
a member of an approved Medallion Guarantee Program or in such other manner as
may be acceptable to the Fund. Proceeds of share redemptions made by Fund
Direct will be transferred only to the commercial bank account specified by the
shareholder. Redemption proceeds may be delayed one additional business day if
the Federal Reserve Bank of Boston or the Federal Reserve Bank of New York is
closed on the day the redemption proceeds would ordinarily be wired.
If you have authorized Telephone Redemption via Fund Direct, you can take
advantage of two methods of telephone redemption: regular telephone redemption
and expedited telephone redemption. You may make regular Fund Direct redemption
requests by calling Nuveen at (800) 858-4084. If a regular telephone redemption
request is received prior to 4:00 p.m. Eastern Time, the shares to be redeemed
earn income on the day the request is made, and the redemption is effected on
the following business day. For regular redemption requests received after 4:00
p.m. Eastern Time, the shares to be redeemed earn income through the following
business day, and the redemption is effected on the second business day
following the request. For all regular redemptions, you will typically receive
your funds within three business days after your redemption is effected. You may
make expedited telephone redemption requests to redeem shares that are worth at
least $1,000 by calling Nuveen at (800) 858-4084. If an expedited redemption
request is received by 12:00 noon Eastern Time, the shares to be redeemed do not
earn income on that day, but the redemption is effected, and you will normally
receive your funds, on that day. If an expedited redemption request is received
after 12:00 noon Eastern Time, the shares to be redeemed earn income on the day
the request is received. The redemption is effected, and you will normally
receive your funds, on the next business day following the request. The Fund
reserves the right to charge a fee for expedited redemption requests.
HOW TO CHANGE AUTHORIZED REDEMPTION INSTRUCTIONS
In order to establish multiple accounts, or to change the account or accounts
designated to receive redemption proceeds, a written request specifying the
change must be sent to Nuveen. This request must be signed by each account
owner with signatures guaranteed by a member of an approved Medallion Guarantee
Program or in such other manner as may be acceptable to the Fund. Further docu-
mentation may be required from corporations, executors, trustees or personal
representatives.
The Fund reserves the right to refuse telephone redemptions and, at its option,
may limit the timing, amount or frequency of these redemptions. Telephone
redemption procedures may be modified or terminated at any time, on 30 days'
notice, by the Fund. The Fund, SSI and Nuveen will not be liable for following
telephone instructions reasonably believed to be genuine.
REDEMPTION THROUGH SERVICE ORGANIZATIONS
Fund shareholders may also redeem shares through their accounts with service
organizations in accordance with procedures established by each such service
organization. The Fund has no redemption charge, but service organizations may
impose transaction fees or other charges relating to the redemption of Fund
shares. Individual shareholders should determine from their service organiza-
tions the procedures and charges, if any, that govern redemptions.
SYSTEMATIC WITHDRAWAL PLAN
If you own Fund shares currently worth at least $10,000, you may establish a
Systematic Withdrawal Plan by completing an application form for the Plan. You
may obtain an application form by checking the applicable box on the enclosed
Application Form or by calling Nuveen toll-free at (800) 858-4084. The Plan
permits you to request periodic withdrawals on a monthly, quarterly, semi-
annual or annual basis in an amount of $50 or more. All shares of the Fund you
own will be accumulated in the Plan, with a sufficient number of shares being
redeemed periodically to meet the requested withdrawal payments. Depending upon
the size of the payments requested under the Plan, redemptions for the purpose
of making such payments may reduce or even exhaust your account. Withdrawals
under this Plan should not, therefore, be considered a yield
---
14
<PAGE>
on investment. A Systematic Withdrawal Plan may be terminated at any time by
you or the Fund. To obtain an Account Update Form, which you can use to initi-
ate a Systematic Withdrawal Plan, call Nuveen toll-free at (800) 858-4084.
REDEMPTION IN KIND
The Fund has committed to pay in cash all redemption requests made by each
shareholder of the Fund during any 90 day period of 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 that may not be changed without share-
holder approval. In the case of redemption requests by shareholders of the Fund
in excess of such amounts, the Board of Directors reserves the right to have
the Fund make payment in whole or in part in securities or other assets of the
Fund in case of an emergency or any time a cash distribution would impair the
liquidity of the Fund to the detriment of the existing shareholders. In this
event, the securities would be valued in the same manner as the securities of
the Fund are valued. If the recipient were to sell such securities, he or she
would incur brokerage charges.
ACCOUNT MINIMUMS
From time to time, the fund may establish minimum account size requirements.
The fund reserves the right to liquidate your account upon 30 days written
notice if the value of your account falls below an established minimum. The
fund presently has set a minimum balance of $100 unless you have an active unit
trust reinvestment account.
OTHER PRACTICES
The Fund may suspend the right of redemption or delay payment more than seven
days (a) during any period when the New York Stock Exchange is closed (other
than customary weekend and holiday closings), (b) when trading in the markets
the Fund normally utilizes is restricted, or an emergency exists as determined
by the SEC so that disposal of the Fund's investments or determination of its
net asset value is not reasonably practicable, or (c) for such other periods as
the SEC by order may permit for protection of the shareholders of the Fund.
General Information
INVESTOR INQUIRIES
Investor inquiries may be made directly of the Fund in writing or by calling
John Nuveen & Co. Incorporated, the Fund's distributor, toll-free at (800) 858-
4084.
CUSTODIAN, SHAREHOLDER SERVICES AGENT AND TRANSFER AGENT
The custodian of the assets of the Fund is The Chase Manhattan Bank, 4 New York
Plaza, New York, New York 10004. The custodian performs custodial fund account-
ing and portfolio accounting services. Shareholder Services, Inc., P.O. Box
5330, Denver, Colorado 80217-5330 is the transfer, shareholder services and
dividend paying agent for the Fund ("Transfer Agent") and performs bookkeeping,
data processing and administrative services incident to the maintenance of
shareholder accounts. On or about August 10, 1998, Chase Global Funds Services
Company, P.O. Box 5186, New York, New York 10274-5186 will become the Fund's
Transfer Agent.
Nuveen Advisory and the transfer agent rely on computer systems to manage the
fund's investments, process shareholder transactions and provide shareholder
account maintenance. Because of the way computers historically have stored
dates, some of these systems currently may not be able to correctly process
activity occurring in the year 2000. Nuveen Advisory is working with the fund's
service providers to adapt their systems to address this "year 2000 issue."
Nuveen Advisory and the fund expect the necessary work to be completed no later
than December 1999, although we can make no assurance with respect to the sys-
tems of the fund's service providers.
CAPITAL STOCK
Nuveen California Tax-Free Fund, Inc. was incorporated in Maryland on October
3, 1985. It is authorized to issue 2,350,000,000 shares of Common Stock, $.01
par value, of the Nuveen California Tax-Free Money Market Fund. Shares of the
Nuveen California Tax-Free Money Market Fund consist of three series as fol-
lows: 400,000,000 shares of the Institutional series, 1,100,000,000 shares of
the Service Plan series and 850,000,000 shares of the Distribution Plan series.
The shares of each such series are identical in all respects except with
respect to the allocation of a portion of the fees paid under the Distribution
and Service Plans and voting rights with respect thereto. See "How to Buy Fund
Shares--Distribution and Service Plan." Shares of each portfolio class have
equal non-cumulative voting rights and equal rights with respect to dividends
declared by such portfolio class and the assets of such portfolio class upon
liquidation, except for the special voting rights of holders of those series of
Nuveen California Tax-Free Money Market Fund that are subject to Distribution
or Service Plans. In addition, only shares of a particular portfolio class are
entitled to vote on matters concerning solely that portfolio class. Shares are
fully paid and nonassessable when issued and have no pre-emptive, conversion or
exchange rights.
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15
<PAGE>
Taxable Equivalent
Yield Tables
TAXABLE EQUIVALENT YIELD TABLES AND THE EFFECT OF TAXES AND INTEREST RATES ON
INVESTMENTS
The following tables show the combined effects for individuals of federal and
state income taxes on:
. what you would have to earn on a taxable investment to equal a given tax-free
yield; and
. the amount that those subject to a given combined tax rate would have to put
into a tax-free investment in order to generate the same after-tax income as
a taxable investment.
These tables are for illustrative purposes only and are not intended to predict
the actual return you might earn on a Fund investment. The Funds occasionally
may advertise their performance in similar tables using other current combined
tax rates than those shown here. The combined tax rates used in these tables
have been rounded to the nearest one-half of one percent. They are based upon
published 1998 marginal federal tax rates and marginal state tax rates cur-
rently available and scheduled to be in effect, and do not take into account
changes in tax rates that are proposed from time to time. A taxpayer's marginal
tax rate is affected by both his taxable income and his adjusted gross income.
The table assumes that federal taxable income is equal to state income subject
to tax, and for cases in which more than one state rate falls within a federal
bracket, the highest state rate corresponding to the highest income within that
federal bracket is used. The tables assume taxpayers are not subject to any
alternative minimum taxes and deduct any state income taxes paid on their fed-
eral income tax returns. Unless noted otherwise, the tables do not reflect any
local taxes or any taxes other than personal income taxes. They also reflect
the 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 cer-
tain maximums, which depend on the number of exemptions claimed and the total
amount of the taxpayer's itemized deductions. For example, the limitation on
itemized deductions will not cause a taxpayer to lose more than 80% of his
allowable itemized deductions, with certain exceptions. The combined tax rates
shown here may be higher or lower than your actual combined tax rate. A higher
combined tax rate would tend to make the dollar amounts in the third table low-
er, while a lower combined tax rate would make the amounts higher. You should
consult your tax adviser to determine your actual combined tax rate.
Combined marginal tax rates for joint taxpayers with four personal exemptions.
<TABLE>
<CAPTION>
FEDERAL COMBINED TAX-FREE YIELD
FEDERAL ADJUSTED STATE AND 2.00% 2.50% 3.00% 3.50% 4.00% 4.50% 5.00% 5.50%
TAXABLE GROSS FEDERAL ---- ---- ---- ---- ---- ---- ----- -----
INCOME INCOME TAX RATE** TAXABLE EQUIVALENT YIELD
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0 - 42,350 $ 0 - 124,500 20.0% 2.50 3.13 3.75 4.38 5.00 5.63 6.25 6.88
42,350 - 102,300 0 - 124,500 34.5 3.05 3.82 4.58 5.34 6.11 6.87 7.63 8.40
124,500 - 186,800 35.5 3.10 3.88 4.65 5.43 6.20 6.98 7.75 8.53
102,300 - 155,950 0 - 124,500 37.5 3.20 4.00 4.80 5.60 6.40 7.20 8.00 8.80
124,500 - 186,800 38.5 3.25 4.07 4.88 5.69 6.50 7.32 8.13 8.94
186,800 - 228,305 40.5 3.36 4.20 5.04 5.88 6.72 7.56 8.40 9.24
228,305 - 265,805 41.5 3.42 4.27 5.13 5.98 6.84 7.69 8.55 9.40
265,805 - 309,300 41.0 3.39 4.24 5.08 5.93 6.78 7.63 8.47 9.32
155,950 - 278,450 124,500 - 186,800 43.0 3.51 4.39 5.26 6.14 7.02 7.89 8.77 9.65
186,800 - 228,305 46.0 3.70 4.65 5.56 6.48 7.41 8.35 9.26 10.19
228,305 - 265,805 46.5 3.74 4.67 5.61 6.54 7.48 8.41 9.35 10.28
265,805 - 309,300 46.0 3.70 4.63 5.56 6.48 7.41 8.33 9.26 10.19
Over 309,300 43.5 3.54 4.42 5.31 6.19 7.08 7.96 8.85 9.73
Over 278,450 186,800 - 228,305 49.5 3.96 4.95 5.94 6.93 7.92 8.91 9.90 10.89
228,305 - 265,805 50.5 4.04 5.05 6.06 7.07 8.08 9.09 10.10 11.11
265,805 - 309,300 49.5 3.96 4.95 5.94 6.93 7.92 8.91 9.90 10.89
Over 309,300 46.5 3.74 4.67 5.61 6.54 7.48 8.41 9.35 10.28
- ----------------------------------------------------------------------------------------------------
</TABLE>
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16
<PAGE>
Combined marginal tax rates for single taxpayers with one personal exemption.
<TABLE>
<CAPTION>
FEDERAL COMBINED TAX-FREE YIELD
FEDERAL ADJUSTED STATE AND 2.00% 2.50% 3.00% 3.50% 4.00% 4.50% 5.00% 5.50%
TAXABLE GROSS FEDERAL ---- ---- ---- ---- ---- ---- ---- -----
INCOME INCOME TAX RATE** TAXABLE EQUIVALENT YIELD
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0 - 25,350 $ 0 - 114,152 20.0% 2.50 3.13 3.75 4.38 5.00 5.63 6.25 6.88
25,350 - 61,400 0 - 114,152 34.5 3.05 3.82 4.58 5.34 6.11 6.87 7.63 8.40
61,400 - 128,100 0 - 114,152 37.5 3.20 4.00 4.80 5.60 6.40 7.20 8.00 8.80
114,152 - 124,500 38.0 3.23 4.03 4.84 5.65 6.45 7.26 8.06 8.87
124,500 - 141,652 39.5 3.31 4.13 4.96 5.79 6.61 7.44 8.26 9.09
141,652 - 247,000 39.0 3.28 4.10 4.92 5.74 6.56 7.38 8.20 9.02
128,100 - 278,450 124,500 - 141,652 44.0 3.57 4.46 5.36 6.25 7.14 8.04 8.93 9.82
141,652 - 247,000 44.0 3.57 4.46 5.36 6.25 7.14 8.04 8.93 9.82
Over 247,000 43.5 3.54 4.42 5.31 6.19 7.08 7.96 8.85 9.73
Over 278,450 Over 247,000 46.5 3.74 4.67 5.61 6.54 7.48 8.41 9.35 10.28
- ---------------------------------------------------------------------------------------------------
</TABLE>
For an equal after-tax return, your tax-free investment may be less.*
<TABLE>
<CAPTION>
FOR AN AFTER-TAX RETURN YOUR TAX-FREE INVESTMENT MAY BE LESS*
EQUAL TO THAT PROVIDED BY A 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0%
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$50,000 in a 4% taxable investment $ 62,500 $ 50,000 $41,667 $35,714 $31,250 $27,778 $25,000
$50,000 in a 5% taxable investment 78,125 62,500 52,083 44,643 39,063 34,722 31,250
$50,000 in a 6% taxable investment 93,750 75,000 62,500 53,571 46,875 41,667 37,500
$50,000 in a 7% taxable investment 109,375 87,500 72,917 62,500 54,688 48,611 43,750
$50,000 in a 8% taxable investment 125,000 100,000 83,333 71,429 62,500 55,556 50,000
- ------------------------------------------------------------------------------------------------------
</TABLE>
* Dollar amounts in the table reflect a 37.5% combined federal and state tax
rate.
** The State tax brackets are those for 1997. The 1998 brackets will be
adjusted to take into account changes in the California Consumer Price Index.
These adjustments have not yet been released.
For example, $50,000 in a 6% taxable investment earns the same after-tax return
as $37,500 in a 5% tax-free Nuveen investment.
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17
<PAGE>
Principal Underwriter
John Nuveen & Co. Incorporated
Investment Bankers
333 West Wacker Drive
Chicago, Illinois 60606
(312) 917-7700
Investment Adviser
Nuveen Advisory Corp.
Subsidiary of John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, Illinois 60606
Custodian
The Chase Manhattan Bank
4 New York Plaza
New York, New York 10004
<PAGE>
Serving Investors
for Generations
[PHOTO APPEARS HERE]
John Nuveen, Sr.
Since our founding in 1898, John Nuveen & Co. has been synonymous with
investments that withstand the test of time. Today, we offer a broad range of
investments designed for mature investors whose portfolios are the principal
source of their ongoing financial security. More than 1.3 million investors have
entrusted Nuveen to help them maintain the lifestyle they currently enjoy.
A value investing approach -- purchasing securities of strong companies and
communities that represent good long-term value -- is the cornerstone of
Nuveen's investment philosophy. It is a careful, long-term strategy that offers
the potential for attractive returns with moderated risk. Successful value
investing begins with in-depth research and a discerning eye for marketplace
opportunity. Nuveen's team of investment professionals is backed by the
discipline, resources and expertise of almost a century of investment
experience, including one of the most recognized research departments in the
industry.
To meet the unique circumstances and financial planning needs of mature
investors, Nuveen offers a wide array of taxable and tax-free investment
products -- including equity and fixed-income mutual funds, unit trusts,
exchange-traded funds, individual managed account services, and cash management
products.
To find out more about how Nuveen investment products and services can help you
preserve your financial security, talk with your financial adviser, or call us
at (800) 621-7227 for more information, including a prospectus where applicable.
Please read that information carefully before you invest.
[NUVEEN LOGO]
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
(800) 621-7227
www.nuveen.com
MPR-2-6.98
<PAGE>
PART B--STATEMENT OF ADDITIONAL INFORMATION
NUVEEN CALIFORNIA TAX-FREE FUND, INC.
333 West Wacker Drive
Chicago, Illinois 60606
<PAGE>
LOGO
Statement of Additional Information
June 24, 1998
Nuveen California Tax-Free Fund, Inc.
333 West Wacker Drive
Chicago, Illinois 60606
NUVEEN CALIFORNIA TAX-FREE MONEY MARKET FUND
This Statement of Additional Information relates to the sole portfolio of
Nuveen California Tax-Free Fund, Inc., the Nuveen California Tax-Free Money
Market Fund (the "Fund"). This Statement of Additional Information is not a
prospectus. A prospectus relating to the Fund may be obtained from certain se-
curities representatives, banks and other financial institutions that have en-
tered into sales agreements with John Nuveen & Co. Incorporated, or from the
Funds, c/o John Nuveen & Co. Incorporated, 333 West Wacker Drive, Chicago, Il-
linois 60606. This Statement of Additional Information relates to, and should
be read in conjunction with, the prospectus referred to above, which is dated
June 24, 1998.
<TABLE>
<S> <C>
Table of Contents Page
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Fundamental Policies and Investment Portfolio 2
- --------------------------------------------------------------------------
Management 20
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Investment Adviser and Investment Management Agreement 25
- --------------------------------------------------------------------------
Portfolio Transactions 26
- --------------------------------------------------------------------------
Net Asset Value 27
- --------------------------------------------------------------------------
Tax Matters 29
- --------------------------------------------------------------------------
Yield Information 33
- --------------------------------------------------------------------------
Additional Information on the Purchase and Redemption of Fund Shares 35
- --------------------------------------------------------------------------
Distribution and Service Plan 35
- --------------------------------------------------------------------------
Independent Public Accountants and Custodian 37
- --------------------------------------------------------------------------
</TABLE>
The audited financial statements for the fiscal year ended February 28, 1998,
appearing in the Annual Report of Nuveen California Tax-Free Fund, Inc. are in-
corporated herein by reference. The Annual Report accompanies this Statement of
Additional Information.
<PAGE>
FUNDAMENTAL POLICIES AND INVESTMENT PORTFOLIO
FUNDAMENTAL POLICIES
The investment objective and certain fundamental investment policies of the
Fund is described in the Prospectus. The Fund, as a fundamental policy, may
not, without the approval of the holders of a majority of the shares of the
Fund:
(1) Invest in securities other than Municipal Obligations and temporary invest-
ments, as those terms are defined in the Prospectuses, and in standby commit-
ments with respect to Municipal Obligations;
(2) Invest more than 5% of its total assets in securities of any one issuer,
except that this limitation shall not apply to securities of the United States
government, its agencies and instrumentalities or to the investment of 25% of
such Fund's assets;
(3) Borrow money, except from banks for temporary or emergency purposes and not
for investment purposes and then only in an amount not exceeding (a) 10% of the
value of its total assets at the time of borrowing or (b) one-third of the
value of the Fund's total assets including the amount borrowed, in order to
meet redemption requests which might otherwise require the untimely disposition
of securities. While any such borrowings exceed 5% of such Fund's total assets,
no additional purchases of investment securities will be made by such Fund. If
due to market fluctuations or other reasons, the value of the Fund's assets
falls below 300% of its borrowings, the Fund will reduce its borrowings within
3 business days. To do this, the Fund may have to sell a portion of its invest-
ments at a time when it may be disadvantageous to do so;
(4) Pledge, mortgage or hypothecate its assets, except that, to secure
borrowings permitted by subparagraph (3) above, it may pledge securities having
a market value at the time of pledge not exceeding 10% of the value of the
Fund's total assets;
(5) Issue senior securities as defined in the Investment Company Act of 1940,
except to the extent such issuance might be involved with respect to borrowings
described under item (3) above.
(6) Underwrite any issue of securities, except to the extent that the purchase
of Municipal Obligations in accordance with its investment objective, policies
and limitations, may be deemed to be an underwriting;
(7) Purchase or sell real estate, but this shall not prevent any Fund from in-
vesting in Municipal Obligations secured by real estate or interests therein or
foreclosing upon and selling such security;
(8) Purchase or sell commodities or commodities contracts or oil, gas or other
mineral exploration or development programs.
(9) Make loans, other than by entering into repurchase agreements and through
the purchase of Municipal Obligations or temporary investments in accordance
with its investment objective, policies and limitations;
(10) Make short sales of securities or purchase any securities on margin, ex-
cept for such short-term credits as are necessary for the clearance of transac-
tions;
(11) Write or purchase put or call options, except to the extent that the pur-
chase of a stand-by commitment may be considered the purchase of a put.
2
<PAGE>
(12) Invest more than 5% of its total assets in securities of unseasoned is-
suers which, together with their predecessors, have been in operation for less
than three years;
(13) Invest more than 25% of its total assets in securities of issuers in any
one industry; provided, however, that such limitations shall not be applicable
to Municipal Obligations issued by governments or political subdivisions of
governments, and obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities;
(14) Invest more than 10% of its total assets in repurchase agreements maturing
in more than seven days, "illiquid" securities (such as non-negotiable CDs) and
securities without readily available market quotations;
(15) Purchase or retain the securities of any issuer other than the securities
of the Fund if, to the Fund's knowledge, those directors of Nuveen California
Tax-Free Fund, Inc., or those officers and directors of Nuveen Advisory Corp.
("Nuveen Advisory") who individually own beneficially more than 1/2 of 1% of
the outstanding securities of such issuer, together own beneficially more than
5% of such outstanding securities.
For the purpose of applying the limitations set forth in paragraphs (2) and
(12) above, an issuer shall be deemed the sole issuer of a security when its
assets and revenues are separate from other governmental entities and its secu-
rities are backed only by its assets and revenues. Similarly, in the case of a
non-governmental user, such as an industrial corporation or a privately owned
or operated hospital, if the security is backed only by the assets and revenues
of the non-governmental user, then such non-governmental user would be deemed
to be the sole issuer. Where a security is also backed by the enforceable obli-
gation of a superior or unrelated governmental entity or other entity (other
than a bond insurer), it shall also be included in the computation of securi-
ties owned that are issued by such governmental or other entity.
Where a security is guaranteed by a governmental entity or some other facility,
such as a bank guarantee or letter of credit, such a guarantee or letter of
credit would be considered a separate security and would be treated as an issue
of such government, other entity or bank. Where a security is insured by bond
insurance, it shall not be considered a security issued or guaranteed by the
insurer; instead the issuer of such security will be determined in accordance
with the principles set forth above. The foregoing restrictions do not limit
the percentage of the Fund's assets that may be invested in securities insured
by any single insurer. It is a fundamental policy of the Fund, which cannot be
changed without the approval of the holders of a majority of shares of such
Fund, that the Fund will not hold securities of a single bank, including secu-
rities backed by a letter of credit of such bank, if such holdings would exceed
10% of the total assets of the Fund.
3
<PAGE>
The foregoing restrictions and limitations, as well as the Fund's policies as
to ratings of fund investments, will apply only at the time of purchase of se-
curities, and the percentage limitations will not be considered violated unless
an excess or deficiency occurs or exists immediately after and as a result of
an acquisition of securities, unless otherwise indicated.
The foregoing fundamental investment policies, together with the investment ob-
jective of the Fund, cannot be changed without approval by holders of a "major-
ity of the Fund's outstanding voting shares." As defined in the Investment Com-
pany Act of 1940, this means the vote of (i) 67% or more of the Fund's shares
present at a meeting, if the holders of more than 50% of the Fund's shares are
present or represented by proxy, or (ii) more than 50% of the Fund's shares,
whichever is less.
Nuveen California Tax-Free Fund, Inc. is a series company under SEC Rule 18f-2
and each Fund is a separate series issuing its own shares. Certain matters un-
der the Investment Company Act of 1940 which must be submitted to a vote of the
holders of the outstanding voting securities of a series company shall not be
deemed to have been effectively acted upon unless approved by the holders of a
majority of the outstanding voting securities of each series affected by such
matter.
PORTFOLIO SECURITIES
As described in the Prospectus, the Fund invests primarily in a diversified
fund of California Municipal Obligations, except that the Fund may not invest
more than 10% of its net assets in California Municipal Obligations issued
within certain U.S. possessions or territories. In general, Municipal Obliga-
tions include debt obligations issued by states, cities and local authorities
to obtain funds for various public purposes, including construction of a wide
range of public facilities such as airports, bridges, highways, hospitals,
housing, mass transportation, schools, streets and water and sewer works. In-
dustrial development bonds and pollution control bonds that are issued by or on
behalf of public authorities to finance various privately-rated facilities are
included within the term Municipal Obligations if the interest paid thereon is
exempt from federal income tax. California Municipal Obligations in which the
Fund will primarily invest are issued by the State of California and cities and
local authorities in that state, and bear interest that, in the opinion of bond
counsel to the issuer, is exempt from federal and California personal income
taxes.
Obligations of issuers of Municipal Obligations are subject to the provisions
of bankruptcy, insolvency and other laws affecting the rights and remedies of
creditors, such as the Federal Bankruptcy Reform Act of 1978. In addition, the
obligations of such issuers may become subject to the laws enacted in the fu-
ture by Congress, state legislatures or referenda extending the time for pay-
ment of principal and/or interest, or imposing other constraints upon enforce-
ment of such obligations or upon municipalities to levy taxes. There is also
the possibility that, as a result of legislation or other conditions, the power
or ability of any issuer to pay, when due, the principal of and interest on its
Municipal Obligations may be materially affected.
4
<PAGE>
The following is a more complete description of certain California Municipal
Obligations in which the Fund may invest.
The various securities in which the Fund intends to invest are described in the
Prospectus. The following is a more complete description of certain short-term
California Municipal Obligations in which the Fund may invest:
Bond Anticipation Notes (BANs) are usually general obligations of state and lo-
cal governmental issuers which are sold to obtain interim financing for pro-
jects that will eventually be funded through the sale of long-term debt obliga-
tions or bonds. The ability of an issuer to meet its obligations on its BANs is
primarily dependent on the issuer's access to the long-term municipal bond mar-
ket and the likelihood that the proceeds of such bond sales will be used to pay
the principal and interest on the BANs.
Tax Anticipation Notes (TANs) are issued by state and local governments to fi-
nance the current operations of such governments. Repayment is generally to be
derived from specific future tax revenues. TANs are usually general obligations
of the issuer. A weakness in an issuer's capacity to raise taxes due to, among
other things, a decline in its tax base or a rise in delinquencies, could ad-
versely affect the issuer's ability to meet its obligations on outstanding
TANs.
Revenue Anticipation Notes (RANs) are issued by governments or governmental
bodies with the expectation that future revenues from a designated source will
be used to repay the notes. In general, they also constitute general obliga-
tions of the issuer. A decline in the receipt of projected revenues, such as
anticipated revenues from another level of government, could adversely affect
an issuer's ability to meet its obligations on outstanding RANs. In addition,
the possibility that the revenues would, when received, be used to meet other
obligations could affect the ability of the issuer to pay the principal and in-
terest on RANs.
Construction Loan Notes are issued to provide construction financing for spe-
cific projects. Frequently, these notes are redeemed with funds obtained from
the Federal Housing Administration.
Bank Notes are notes issued by local governmental bodies and agencies such as
those described above to commercial banks as evidence of borrowings. The pur-
poses for which the notes are issued are varied but they are frequently issued
to meet short-term working-capital or capital-project needs. These notes may
have risks similar to the risks associated with TANs and RANs.
Variable and Floating Rate Instruments-Certain Municipal Obligations, certain
instruments issued, guaranteed or sponsored by the U.S. Government or its agen-
cies, and certain debt instruments issued by domestic banks or corporations,
may carry variable or floating rates of interest. Such instruments bear inter-
est at rates which are not fixed, but which vary with changes in specified mar-
ket rates or indices, such as a bank prime rate or a tax-exempt money market
index. Variable rate notes are adjusted to current interest rate levels at cer-
tain specified times, such as every 30 days, as set forth in the instrument. A
floating rate note adjusts automatically whenever there is a change in its base
interest rate adjustor, e.g., a change in the prime lending rate on specified
interest rate indices. Typically such
5
<PAGE>
instruments carry demand features permitting the Money Market Fund to redeem at
par upon specified notice.
The Money Market Fund's right to obtain payment at par on a demand instrument
upon demand could be affected by events occurring between the date the Money
Market Fund elects to redeem the instrument and the date redemption proceeds
are due which affect the ability of the issuer to pay the instrument at par
value. The Adviser will monitor on an ongoing basis the pricing, quality and
liquidity of such instruments and will similarly monitor the ability of an is-
suer of a demand instrument, including those supported by bank letters of
credit or guarantees, to pay principal and interest on demand. Although the ul-
timate maturity of such variable rate obligations may exceed 397 days, the
Money Market Fund will treat the maturity of each variable rate demand obliga-
tion, for purposes of computing its dollar weighted average fund maturity, as
the longer of (i) the notice period required before the Money Market Fund is
entitled to payment of the principal amount through demand, or (ii) the period
remaining until the next interest rate adjustment.
The Money Market Fund may also obtain standby commitments with respect to Mu-
nicipal Obligations. Under a standby commitment (often referred to as a put),
the party issuing the commitment agrees to purchase at the Money Market Fund's
option the Municipal Obligation 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 Money Market 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 Money Market Fund upon its exercise of a standby com-
mitment would be (1) the acquisition cost of the Municipal Obligations (exclud-
ing any accrued interest that the Money Market Fund paid on acquisition), less
any amortized market premium or plus any amortized market or original issue
discount during the period the Money Market Fund owned the security, plus (2)
all interest accrued on the security since the last interest payment date dur-
ing the period the security was owned by the Money Market Fund. The Money Mar-
ket Fund's right to exercise standby commitments held by it will be uncondi-
tional and unqualified. The acquisition of a standby commitment will not affect
the valuation 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 Money Market Fund may
purchase standby commitments for cash or pay a higher price for fund securities
which are acquired subject to such a commitment (thus reducing the yield to ma-
turity otherwise available for the same securities). The maturity of a Munici-
pal Obligation purchased by the Money Market Fund will not be considered short-
ened by any standby commitment to which such security is subject. Although the
Money Market Fund's rights under a standby commitment would not be transfer-
able, the Money Market Fund could sell Municipal Obligations which were subject
to a standby commitment to a third party at any time.
6
<PAGE>
SPECIAL CONSIDERATIONS RELATING TO CALIFORNIA MUNICIPAL OBLIGATIONS
As described above, except to the extent the Fund invests in temporary invest-
ments, the Fund will invest substantially all of its assets in California Mu-
nicipal Obligations. The Fund is therefore susceptible to political, economic
or regulatory factors affecting issuers of California Municipal Obligations.
These include the possible adverse effects of certain California constitutional
amendments, legislative measures, voter initiatives and other matters that are
described below. The following information provides only a brief summary of the
complex factors affecting the financial situation in California (the "State")
and is derived from sources that are generally available to investors and is
believed to be accurate. No independent verification has been made of the accu-
racy or completeness of any of the following information. It is based in part
on information obtained from various State and local agencies in California or
contained in Official Statements for various California Municipal Obligations.
During the early 1990's, California experienced significant financial difficul-
ties, which reduced its credit standing, but the state's finances have improved
since 1994. The ratings of certain related debt of other issuers for which Cal-
ifornia has an outstanding lease purchase, guarantee or other contractual obli-
gation (such as for state-insured hospital bonds) are generally linked directly
to California's rating. Should the financial condition of California deterio-
rate again, its credit ratings could be further reduced, and the market value
and marketability of all outstanding notes and bonds issued by California, its
public authorities or local governments could be adversely affected.
Economic Overview
Total personal income in the State, at an estimated $800 billion in 1996, ac-
counts for almost 13% of all personal income in the nation. Total employment is
over 15.6 million, the majority of which is in the service, trade and manufac-
turing sectors.
Unemployment has declined dramatically from its 10% recession peak and is rap-
idly approaching the national level. Economic indicators show a steady and
strong recovery underway in California since the start of 1994, particularly in
the export-related industries, services, electronics, entertainment and tour-
ism. The recovery in export-related industries has been dampened somewhat by
the economic crisis in Asia.
Constitutional Limitations on Taxes, Other Charges and Appropriations
Limitation on Property Taxes. Certain California Municipal Obligations may be
obligations of issuers which rely in whole or in part, directly or indirectly,
on ad valorem property taxes as a source of revenue. The taxing powers of Cali-
fornia local governments and districts are limited by Article XIIIA of the
California Constitution, enacted by the voters in 1978 and commonly known as
"Proposition 13." Briefly, Article XIIIA limits to 1% of full cash value the
rate of ad valorem property taxes on real property and generally restricts the
reassessment of property to 2% per year, except upon new construction or change
of ownership (subject to a number of exemptions). Taxing entities may, however,
raise ad valorem taxes above the 1% limit to pay debt service on voter-approved
bonded indebtedness.
Under Article XIIIA, the basic 1% ad valorem tax levy is applied against the
assessed value of property as of the owner's date of acquisition (or as of
March 1, 1975, if acquired earlier), subject to certain adjust-
7
<PAGE>
ments. This system has resulted in widely varying amounts of tax on similarly
situated properties. Several lawsuits have been filed challenging the acquisi-
tion-based assessment system of Proposition 13, but it was upheld by the U.S.
Supreme Court in 1992.
Article XIIIA prohibits local governments from raising revenues through ad va-
lorem property taxes above the 1% limit; it also requires voters of any gov-
ernmental unit to give two-thirds approval to levy any "special tax." Court
decisions, however, allowed a non-voter approved levy of "general taxes" which
were not dedicated to a specific use.
Limitation on Other Taxes, Fees and Charges. On November 5, 1996, the voters
of the State approved Proposition 218, called the "Right to Vote on Taxes
Act." Proposition 218 added Articles XIIIC and XIIID to the State Constitu-
tion, which contain a number of provisions affecting the ability of local
agencies to levy and collect both existing and future taxes, assessments, fees
and charges.
Article XIIIC requires that all new or increased local taxes be submitted to
the electorate before they become effective. Taxes for general governmental
purposes require a majority vote and taxes for specific purposes require a
two-thirds vote. Further, any general purpose tax which was imposed, extended
or increased without voter approval after December 31, 1994 must be approved
by a majority vote within two years.
Article XIIID contains several new provisions making it generally more dif-
ficult for local agencies to levy and maintain "assessments" for municipal
services and programs. Article XIIID also contains several new provisions af-
fecting "fees" and "charges", defined for purposes of Article XIIID to mean
"any levy other than an ad valorem tax, a special tax, or an assessment, im-
posed by a [local government] upon a parcel or upon a person as an incident of
property ownership, including a user fee or charge for a property related
service." All new and existing property related fees and charges must conform
to requirements prohibiting, among other things, fees and charges which gener-
ate revenues exceeding the funds required to provide the property related
service or are used for unrelated purposes. There are new notice, hearing and
protest procedures for levying or increasing property related fees and
charges, and, except for fees or charges for sewer, water and refuse collec-
tion services (or fees for electrical and gas service, which are not treated
as "property related" for purposes of Article XIIID), no property related fee
or charge may be imposed or increased without majority approval by the prop-
erty owners subject to the fee or charge or, at the option of the local agen-
cy, two-thirds voter approval by the electorate residing in the affected area.
In addition to the provisions described above, Article XIIIC removes limita-
tions on the initiative power in matters of local taxes, assessments, fees and
charges. Consequently, local voters could, by future initiative, repeal, re-
duce or prohibit the future imposition or increase of any local tax, assess-
ment, fee or charge. It is unclear how this right of local initiative may be
used in cases where taxes or charges have been or will be specifically pledged
to secure debt issues.
The interpretation and application of Proposition 218 will ultimately be de-
termined by the courts with respect to a number of matters, and it is not pos-
sible at this time to predict with certainty the outcome of such determina-
tions. Proposition 218 is generally viewed as restricting the fiscal flexibil-
ity
8
<PAGE>
of local governments, and for this reason, some ratings of California cities
and counties have been, and others may be, reduced.
Appropriations Limits. The State and its local governments are subject to an
annual "appropriations limit" imposed by Article XIIIB of the California Con-
stitution, enacted by the voters in 1979 and significantly amended by Proposi-
tions 98 and 111 in 1988 and 1990, respectively. Article XIIIB prohibits the
State or any covered local government from spending "appropriations subject to
limitation" in excess of the appropriations limit imposed. "Appropriations
subject to limitation" are authorizations to spend "proceeds of taxes," which
consist of tax revenues and certain other funds, including proceeds from regu-
latory licenses, user charges or other fees, to the extent that such proceeds
exceed the cost of providing the product or service, but "proceeds of taxes"
exclude most State subventions to local governments. No limit is imposed on
appropriations of funds which are not "proceeds of taxes," such as reasonable
user charges or fees, and certain other non-tax funds, including bond pro-
ceeds.
Among the expenditures not included in the Article XIIIB appropriations limit
are (1) the debt service cost of bonds issued or authorized prior to January
1, 1979, or subsequently authorized by the voters, (2) appropriations arising
from certain emergencies declared by the Governor, (3) appropriations for cer-
tain capital outlay projects, (4) appropriations by the State of post-1989 in-
creases in gasoline taxes and vehicle weight fees, and (5) appropriations made
in certain cases of emergency.
The appropriations limit for each year is adjusted annually to reflect changes
in cost of living and population, and any transfers of service responsibili-
ties between government units. The definitions for such adjustments were lib-
eralized in 1990 to follow more closely growth in the State's economy.
"Excess" revenues are measured over a two year cycle. Local governments must
return any excess to taxpayers by rate reductions. The State must refund 50%
of any excess, with the other 50% paid to schools and community colleges. With
more liberal annual adjustment factors since 1988, and depressed revenues
since 1990 because of the recession, few governments are currently operating
near their spending limits, but this condition may change over time. Local
governments may by voter approval exceed their spending limits for up to four
years. During fiscal year 1986-87, State receipts from proceeds of taxes ex-
ceeded its appropriations limit by $1.1 billion, which was returned to taxpay-
ers. Since that year, appropriations subject to limitation have been under the
State limit. State appropriations were $7.0 billion under the limit for fiscal
year 1996-97.
Because of the complex nature of Articles XIIIA, XIIIB, XIIIC and XIIID of the
California Constitution, the ambiguities and possible inconsistencies in their
terms, and the impossibility of predicting future appropriations or changes in
population and cost of living, and the probability of continuing legal chal-
lenges, it is not currently possible to determine fully the impact of these
Articles on California Municipal Obligations or on the ability of the State or
local governments to pay debt service on such California Municipal Obliga-
tions. It is not possible, at the present time, to predict the outcome of any
pending litigation with respect to the ultimate scope, impact or constitution-
ality of these Articles, or the impact of any such determinations upon State
agencies or local governments, or upon their ability to pay debt service on
their obligations. Future initiatives or legislative changes in laws or the
California Constitution may also affect the ability of the State or local is-
suers to repay their obligations.
9
<PAGE>
Obligations of the State of California
Under the California Constitution, debt service on outstanding general obliga-
tion bonds is the second charge to the General Fund after support of the pub-
lic school system and public institutions of higher education. Under the Cali-
fornia Constitution, debt service on outstanding general obligation bonds is
the second charge to the General Fund after support of the public school sys-
tem and public institutions of higher education. As of June 30, 1997, the
State had outstanding approximately $17.95 billion of long-term general obli-
gation bonds, plus $781 million of general obligation commercial paper which
will be refunded by long-term bonds in the future, and $6.1 billion of lease-
purchase debt supported by the State General Fund. The State also had about
$7.5 billion of authorized and unissued general obligation bonds. In FY 1996-
97, debt service on general obligation bonds and lease purchase bonds was ap-
proximately 5.0% of General Fund revenues.
Recent Financial Results
The principal sources of General Fund revenues in 1996-97 were the California
personal income tax (27% of total revenues), the sales and use tax (24%) and
bank and corporation taxes (7%). The State maintains a Special Fund for Eco-
nomic Uncertainties (the "SFEU"), derived from General Fund revenues, as a re-
serve to meet cash needs of the General Fund, but which is required to be re-
plenished as soon as sufficient revenues are available. During the 1997 fiscal
year the SFEU was fully depleted. However, the robust economy should afford
the State the ability to appropriate funds to the SFEU in the near term.
General. Throughout the 1980's, State spending increased rapidly as the State
population and economy also grew rapidly, including increased spending for
many assistance programs to local governments, which were constrained by Prop-
osition 13 and other laws. The largest State program is assistance to local
public school districts. In 1988, an initiative (Proposition 98) was enacted
which (subject to suspension by a two-thirds vote of the Legislature and the
Governor) guarantees local school districts and community college districts a
minimum share of State General Fund revenues (currently about 35%).
Since the start of the 1990-91 fiscal year, the State has faced adverse eco-
nomic, fiscal, and budget conditions. The economic recession seriously af-
fected State tax revenues. It also caused increased expenditures for health
and welfare programs. Since the start of the 1990-91 fiscal year, the State
has faced adverse economic, fiscal and budget conditions. The economic reces-
sion seriously affected State tax revenues. It also caused increased expendi-
tures for health and welfare programs. As a result of the strengthening State
economy, General Fund revenue growth is now outpacing the costs associated
with many of the larger programs supported by the General Fund. However, the
State will face additional challenges in coming years by the expected need to
substantially increase capital and operating funds for State infrastructure
needs, as well as corrections resulting from a "Three Strikes" law enacted in
1994.
Recent Budgets. As a result of these factors, among others, from the late
1980's until 1992-93, the State had a period of nearly chronic budget imbal-
ance, with expenditures exceeding revenues in four out of six years, and the
State accumulated and sustained a budget deficit in the budget reserve, the
SFEU approaching $2.8 billion at its peak at June 30, 1993. Starting in the
1990-91 Fiscal Year and for each year thereafter, each budget required
multibillion dollar actions to bring projected revenues and expenditures
10
<PAGE>
into balance and to close large "budget gaps" which were identified. The Legis-
lative and Governor eventually agreed on a number of different steps to produce
Budget Acts in the Years 1991-92 to 1995-96 (although not all of these actions
were taken in each year):
. significant cuts in health and welfare program expenditures;
. transfers of program responsibilities and some funding sources from the
State to local governments, coupled with some reduction in mandates on lo-
cal government;
. transfer of about $3.6 billion in annual local property tax revenues from
cities, counties, redevelopment agencies and some other districts to local
school districts, thereby reducing state funding for schools;
. reduction in growth of support for higher education programs, coupled with
increases in student fees;
. revenue increases (particularly in the 1992-92 Fiscal Year budget), most of
which were for a short duration;
. increased reliance on aid from the federal government to offset the costs
of incarcerating, educating and providing health and welfare services to
undocumented aliens (although these efforts have produced much less federal
aid than the State Administration had requested); and
. various one-time adjustment and accounting changes.
Despite these budget actions, the effects of the recession led to large unan-
ticipated deficits in the SFEU, as compared to projected positive balances. By
the start of the 1993-94 Fiscal Year, the accumulated deficit was so large (al-
most $2.8 billion) that it was impractical to budget to retire it in one year,
so a two-year program was implemented, using the issuance of revenue anticipa-
tion warrants to carry a portion of the deficit over the end of the fiscal
year. When the economy failed to recover sufficiently in 1993-94, a second two-
year plan was implemented in 1994-95, to carry the final retirement of the def-
icit into 1995-96.
The combination of stringent budget actions cutting State expenditures, and the
turnaround of the economy by late 1993, finally led to the restoration of posi-
tive financial results. While General Fund revenues and expenditures were es-
sentially equal in FY 1992-93 (following two years of excess expenditures over
revenues), the General Fund had positive operating results in FY 1993-94, 1994-
95, and 1995-96 which have reduced the accumulated budget deficit to about $70
million as of June 30, 1996.
A consequence of the accumulated budget deficits in the early 1990's, together
with other factors such as disbursement of funds to local school districts
"borrowed" from future fiscal years and hence not shown in the annual budget,
was to significantly reduce the State's cash resources available to pay its on-
going obligations. When the Legislature and the Governor failed to adopt a bud-
get for the 1992-93 Fiscal Year by July 1, 1992, which would have allowed the
State to carry out its normal annual cash flow borrowing to replenish its cash
reserves, the State Controller was forced to issue approximately $3.8 billion
of registered warrants ("IOUs") over a 2-month period to pay a variety of obli-
gations representing prior years' or continuing appropriations, and mandates
from court orders.
11
<PAGE>
The State's cash condition became so serious that from late spring 1992 until
1995, the State had to rely on issuance of short term notes which matured in a
subsequent fiscal year to finance its ongoing deficit, and pay current obliga-
tions. With the repayment of the last of these deficit notes in April, 1996,
the State does not plan to rely further on external borrowing across fiscal
years, but will continue its normal cash flow borrowings during a fiscal year.
The 1997-98 Budget Act was signed by the Governor on August 18, 1997, together
with related implementating bills. The total budget package authorized State
expenditures of $67.2 billion. This total spending includes $52.8 billion from
the General Fund (an 8 percent increase from 1996-97) and $14.4 billion from
special funds (a 6.1 percent increase). The 1997-98 Budget Act included signif-
icant increases in education spending and a major reform to the State's welfare
program. In other areas, the budget includes relatively few new initiatives and
fairly limited changes to program funding. This was due to the decision to re-
pay the Public Employee's Retirement System (PERS) $1.2 billion. The repayment
resulted from a court ruling which declared unconstitutional the General Fund's
deferral of State contributions to the retirement fund in the early 1990s.
The following are principal features of the 1997-98 Budget Act:
1. No tax cuts were included in the final budget. The Legislature rejected the
Governor's proposal for a reduction in personal and corporate income tax
rates.
2. Major increases in K-12 education. The budget would use the increased fund-
ing to expand the class size reduction program to a fourth grade and signif-
icantly increase local revenue limit funding.
3. The University of California, California State University and California
Community Colleges would receive additional funding with no fee increases.
4. A major welfare reform program CalWORKs (California Work Opportunity and Re-
sponsibility to Kids Program) was funded. It includes time limits on aid for
adults, participation requirements for adults, expanded child care and job
training service, and various county fiscal incentives.
5. The budget funded inmate caseload and contains no money for new prisons. In
addition, the budget assumed $94 million more in federal funds than the
amount in the Governor's budget to offset the State's cost of supervising
undocumented felons.
The Department of Finance has reported that, based on stronger than expected
revenues during the first nine months of the 1997-98 fiscal year, reflecting
the continued strength of the State's economic recovery, General Fund revenues
are $301 million above projections.
Proposed 1998-99 Budget. On January 9, 1998, the Governor released his proposed
budget for FY 1998-99. Assuming continuing strength in the economy, the Gover-
nor projects General Fund revenues (including transfers) to be $55.4 billion
and proposes expenditures to be $55.4 billion, to leave a budget
12
<PAGE>
reserve in the SFEU of $296 million at June 30, 1999. The Governor proposed
further programs emphasizing education, public safety, and economic develop-
ment.
Although the State's strong economy is producing record revenues to the State
government, the State's budget continues to be under stress from mandated
spending on education, a rising prison population, and social needs of a grow-
ing population with many immigrants. These factors which limit State spending
growth also put pressure on local governments. There can be no assurances that,
if economic conditions weaken, or other factors intercede, the State will not
experience budget gaps in the future.
Bond Rating
The ratings on California's long-term general obligation bonds were reduced in
the early 1990s from "AAA" levels which had existed prior to the recession. In
1997, Fitch raised their rating of California's general obligation bonds, which
as of May 1998, were assigned ratings of "A+" by Standard & Poor's, "A1" by
Moody's and "AA-" from Fitch.
There can be no assurance that such ratings will be maintained in the future.
It should be noted that the creditworthiness of obligations issued by local
California issuers may be unrelated to the creditworthiness of obligations is-
sued by the State of California, and that there is no obligation on the part of
the State to make payment on such local obligations in the event of default.
Legal Proceedings
The State is involved in certain legal proceedings (described in the State's
recent financial statements) that, if decided against the State, may require
the State to make significant future expenditures or may substantially impair
revenues. Trial courts have recently entered tentative decisions or injunctions
which would overturn several parts of the state's recent budget compromises.
The matters covered by these lawsuits include reductions in welfare payments
and the use of certain cigarette tax funds for health costs. All of these cases
are subject to further proceedings and appeals, and if California eventually
loses, the final remedies may not have to be implemented in one year.
Obligations of Other Issuers
Other Issuers of California Municipal Obligations
There are a number of state agencies, instrumentalities and political subdivi-
sions of the State that issue Municipal Obligations, some of which may be con-
duit revenue obligations payable from payments from private borrowers. These
entities are subject to various economic risks and uncertainties, and the
credit quality of the securities issued by them may vary considerably from the
credit quality of obligations backed by the full faith and credit of the State.
State Assistance. Property tax revenues received by local governments declined
more than 50% following passage of Proposition 13. Subsequently, the California
Legislature enacted measures to provide for the redistribution of the State's
General Fund surplus to local agencies, the reallocation of certain State reve-
nues to local agencies and the assumption of certain governmental functions by
the State to assist municipal issuers to raise revenues. Total local assistance
from the State's General Fund was budgeted at approximately 75% of General Fund
expenditures in recent years, including the effect of implementing
13
<PAGE>
reductions in certain aid programs. To reduce State General Fund support for
school districts, the 1992-93 and 1993-94 Budget Acts caused local governments
to transfer $3.9 billion of property tax revenues to school districts, repre-
senting loss of the post-Proposition 13 "bailout" aid. Local governments have
in return received greater revenues and greater flexibility to operate health
and welfare programs. To the extent the State should be constrained by its Ar-
ticle XIIIB appropriations limit, or its obligation to conform to Proposition
98, or other fiscal considerations, the absolute level, or the rate of growth,
of State assistance to local governments may continue to be reduced. Any such
reductions in State aid could compound the serious fiscal constraints already
experienced by many local governments, particularly counties. At least one ru-
ral county (Butte) publicly announced that it might enter bankruptcy proceed-
ings in August 1990, although such plans were put off after the Governor ap-
proved legislation to provide additional funds for the county. Other counties
have also indicated that their budgetary condition is extremely grave. Los An-
geles County, the largest in the State, was forced to make significant cuts in
services and personnel, particularly in the health care system, in order to
balance its budget in 1995-96 and 1996-97. Los Angeles County's debt was down-
graded by Moody's and S&P in the summer of 1995. Orange County, which emerged
from Federal Bankruptcy Court protection in June 1996, has significantly re-
duced county services and personnel, and faces strict financial conditions fol-
lowing large investment fund losses in 1994 which resulted in bankruptcy.
Counties and cities may face further budgetary pressures as a result of changes
in welfare and public assistance programs, which were to be enacted by June,
1997 in order to comply with federal welfare reform law. It is not yet known
what the overall impact will be on local government finances.
Assessment Bonds. California Municipal Obligations which are assessment bonds
may be adversely affected by a general decline in real estate values or a slow-
down in real estate sales activity. In many cases, such bonds are secured by
land which is undeveloped at the time of issuance but anticipated to be devel-
oped within a few years after issuance. In the event of such reduction or slow-
down, such development may not occur or may be delayed, thereby increasing the
risk of a default on the bonds. Because the special assessments or taxes secur-
ing these bonds are not the personal liability of the owners of the property
assessed, the lien on the property is the only security for the bonds. More-
over, in most cases the issuer of these bonds is not required to make payments
on the bonds in the event of delinquency in the payment of assessments or tax-
es, except from amounts, if any, in a reserve fund established for the bonds.
California Long Term Lease Obligations. Based on a series of court decisions,
certain long-term lease obligations, though typically payable from the general
fund of the State or a municipality, are not considered "indebtedness" requir-
ing voter approval. Such leases, however, are subject to "abatement" in the
event the facility being leased is unavailable for beneficial use and occupancy
by the municipality during the term of the lease. Abatement is not a default,
and there may be no remedies available to the holders of the certificates evi-
dencing the lease obligation in the event abatement occurs. The most common
cases of abatement are failure to complete construction of the facility before
the end of the period during which lease payments have been capitalized and un-
insured casualty losses to the facility (e.g., due to earthquake). In the event
abatement occurs with respect to a lease obligation, lease payments may be in-
terrupted (if all available insurance proceeds and reserves are exhausted) and
the certifi-
14
<PAGE>
cates may not be paid when due. Litigation is brought from time to time which
challenges the constitutionality of such lease arrangements.
Other Considerations
The repayment of industrial development securities secured by real property may
be affected by California laws limiting foreclosure rights of creditors. Secu-
rities backed by healthcare and hospital revenues may be affected by changes in
State regulations governing cost reimbursements to health care providers under
Medi-Cal (the State's Medicaid program), including risks related to the policy
of awarding exclusive contracts to certain hospitals.
Limitations on ad valorem property taxes may particularly affect "tax alloca-
tion" bonds issued by California redevelopment agencies. Such bonds are secured
solely by the increase in assessed valuation of a redevelopment project area
after the start of redevelopment activity. In the event that assessed values in
the redevelopment project decline (e.g., because of a major natural disaster
such as an earthquake), the tax increment revenue may be insufficient to make
principal and interest payments on these bonds. Both Moody's and S&P suspended
ratings on California tax allocation bonds after the enactment of Articles
XIIIA and XIIIB, and only resumed such ratings on a selective basis.
Proposition 87, approved by California voters in 1988, requires that all reve-
nues produced by a tax rate increase go directly to the taxing entity which in-
creased such tax rate to repay that entity's general obligation indebtedness.
As a result, redevelopment agencies (which, typically, are the issuers of tax
allocation securities) no longer receive an increase in tax increment when
taxes on property in the project area are increased to repay voter-approved
bonded indebtedness.
The effect of these various constitutional and statutory changes upon the abil-
ity of California municipal securities issuers to pay interest and principal on
their obligations remains unclear. Furthermore, other measures affecting the
taxing or spending authority of California or its political subdivisions may be
approved or enacted in the future. Legislation has been or may be introduced
which would modify existing taxes or other revenue-raising measures or which
either would further limit or, alternatively, would increase the abilities of
state and local governments to impose new taxes or increase existing taxes. It
is not possible, at present, to predict the extent to which any such legisla-
tion will be enacted. Nor is it possible, at present, to determine the impact
of any such legislation on California Municipal Obligations in which the Fund
may invest, future allocations of state revenues to local governments or the
abilities of state or local governments to pay the interest on, or repay the
principal of, such California Municipal Obligations.
Substantially all of California is within an active geologic region subject to
major seismic activity. Northern California in 1989 and Southern California in
1994 experienced major earthquakes causing billions of dollars in damages. The
federal government provided more than $13 billion in aid for both earthquakes,
and neither event is expected to have any long-term negative economic impact.
Any California Municipal Obligation in the Fund could be affected by an inter-
ruption of revenues because of damaged facilities, or, consequently, income tax
deductions for casualty losses or property tax assessment reductions. Compensa-
tory financial assistance could be constrained by the inability of (i) an is-
suer to
15
<PAGE>
have obtained earthquake insurance coverage at reasonable rates; (ii) an in-
surer to perform on its contracts of insurance in the event of widespread loss-
es; or (iii) the federal or State government to appropriate sufficient funds
within their respective budget limitations.
TEMPORARY INVESTMENTS
The Prospectus discusses briefly the ability of the Fund to invest a portion of
its assets in federally tax-exempt or taxable "temporary investments." Tempo-
rary investments will not exceed 20% of the Fund's assets except when made for
defensive purposes. The Fund will invest only in temporary investments with re-
maining maturities of 397 days or less which, in the opinion of Nuveen Adviso-
ry, are of "high grade" quality.
Subject to the foregoing limitations, the Fund may invest in the following fed-
erally tax-exempt temporary investments:
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. Tax anticipation notes 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 delin-
quencies, could adversely 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 pro-
jected revenues, such as anticipated revenues from another level of government,
could adversely affect an issuer's ability to meet its obligations on outstand-
ing RANs. In addition, the possibility that the revenues would, when received,
be used to meet other obligations could affect the ability of the issuer to pay
the principal and interest 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 government bodies and agencies as those
described above to commercial banks as evidence of borrowings. The purposes for
which the notes are issued are varied but they are frequently issued to meet
short-term working capital or capital-project needs. These notes may have risks
similar to the risks associated with TANs and RANs.
16
<PAGE>
Tax-Exempt Commercial Paper (Municipal Paper) represents very short-term
unsecured, negotiable promissory notes, issued by states, municipalities and
their agencies. Payment of principal and interest on issues of municipal paper
may be made from various sources, to the extent the funds are available there-
from. Maturities of municipal paper generally will be shorter than the maturi-
ties of TANs, BANs or RANs. 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 permitted under its investment objective, policies and limitations. Such
notes may be issued for different purposes and may be secured differently from
those mentioned above.
The Fund may also invest in the following taxable temporary investments:
U.S. Government Direct Obligations are issued by the United States Treasury and
include bills, notes and bonds.
- -- Treasury bills are issued with maturities of up to one year. They are issued
in bearer form, are sold on a discount basis and are payable at par value at
maturity.
- -- Treasury notes are longer-term interest bearing obligations with original
maturities of one to seven years.
- -- Treasury bonds are longer-term interest-bearing obligations with original
maturities from five to thirty years.
U.S. Government Agencies Securities--Certain federal agencies have been estab-
lished as instrumentalities of the United States Government to supervise and
finance certain types of activities. These agencies include, but are not lim-
ited to, the Bank for Cooperatives, Federal Land Banks, Federal Intermediate
Credit Banks, Federal Home Loan Banks, Federal National Mortgage Association,
Government National Mortgage Association, Export-Import Bank of the United
States, and Tennessee Valley Authority. Issues of these agencies, while not di-
rect obligations of the United States Government, are either backed by
the full faith and credit of the United States or are guaranteed by the Trea-
sury or supported by the issuing agencies' right to borrow from the Treasury.
There can be no assurance that the United States Government itself will pay in-
terest and principal on securities as to which it is not legally so obligated.
Certificates of Deposit (CDs)--A certificate of deposit is a negotiable inter-
est bearing instrument with a specific maturity. CDs are issued by banks in ex-
change for the deposit of funds and normally can be traded in the secondary
market, prior to maturity. The Fund will only invest in U.S. dollar denominated
CDs issued by U.S. banks with assets of $1 billion or more.
Commercial Paper--Commercial paper is the term used to designate unsecured
short-term promissory notes issued by corporations. Maturities on these issues
vary from a few days to nine months. Commercial paper may be purchased from
U.S. corporations.
17
<PAGE>
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 present 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 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 price. In the
event the value of the collateral declined below the repurchase price, Nuveen
Advisory will demand additional collateral from the issuer to increase the
value of the collateral to at least that of the repurchase price. The Fund will
not invest more than 10% of its assets in repurchase agreements maturing in
more than seven days.
Variable and Floating Rate Investments--See description on page 5.
RATINGS OF INVESTMENTS
The four highest ratings of Moody's for Municipal Obligations are Aaa, Aa, A
and Baa. Municipal Obligations rated Aaa are judged to be of the "best quali-
ty." 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 ele-
ments make long-term risks appear somewhat larger than in Aaa rated Municipal
Obligations. The Aaa and Aa rated Municipal Obligations comprise what are gen-
erally known as "high grade bonds." Municipal Obligations that are rated A by
Moody's possess many favorable investment attributes and are considered upper
medium grade obligations. Factors giving security to principal and interest of
A rated Municipal Obligations are considered adequate, but elements may be
present, which suggest a susceptibility to impairment sometime in the future.
Municipal Obligations rated Baa by Moody's are considered medium grade obliga-
tions (i.e., they are neither highly protected nor poorly secured). Such bonds
lack outstanding investment characteristics and in fact have speculative char-
acteristics as well. Moody's bond rating symbols may contain numerical modifi-
ers 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 general rating category.
18
<PAGE>
The four highest ratings of S&P for Municipal Obligations are AAA, AA, A and
BBB. Municipal Obligations rated AAA have an extremely strong capacity to pay
principal and interest. The rating of AA indicates that capacity to pay princi-
pal and interest is very strong and such bonds differ from AAA issues only in
small degree. The category of A describes bonds which have a strong capacity to
pay principal and interest, although such bonds are somewhat more susceptible
to the adverse effects of changes in circumstances and economic conditions. The
BBB rating is the lowest "investment grade" security rating by S&P. Municipal
Obligations rated BBB are regarded as having an adequate capacity to pay prin-
cipal and interest. Whereas such bonds normally exhibit adequate protection pa-
rameters, adverse economic conditions are more likely to lead to a weakened ca-
pacity to pay principal and interest for bonds in this category than for bonds
in the A category.
The "Other Corporate Obligations" category of temporary investments are corpo-
rate (as opposed to municipal) debt obligations rated AAA by S&P or Aaa by
Moody's. Corporate debt obligations rated AAA by S&P have an extremely strong
capacity to pay principal and interest. The Moody's corporate debt rating of
Aaa is comparable to that set forth above for Municipal Obligations.
The two highest ratings of Moody's and S&P for federally tax-exempt short-term
loans and notes are MIG-1 and MIG-2, or VMIG-1 or VMIG-2 in the case of vari-
able rate instruments, and SP-1 and SP-2, respectively. Obligations designated
MIG-1 or VMIG-1 are the best quality, enjoying strong protection from estab-
lished cash flows of funds for their servicing or from established and broad-
based access to the market for refinancing, or both. Obligations designated as
MIG-2 or VMIG-2 are high quality obligations with ample margins of protection.
The designation SP-1 indicates a very strong or strong capacity to pay princi-
pal and interest while the designation SP-2 denotes a satisfactory capacity to
pay principal and interest.
The Fund's ability to purchase commercial paper of tax-exempt and corporate is-
suers is limited to commercial paper rated highly by nationally recognized sta-
tistical rating organizations. Issuers rated in the highest category generally
have a superior capacity for repayment of short-term obligations normally evi-
denced by the following characteristics: leading market positions in well-es-
tablished industries; high rates or return on funds employed; conservative cap-
italization structures with moderate reliance on debt and ample asset protec-
tion; broad margins in earnings coverage of fixed financial charges and high
internal cash generation; well-established access to a range of financial mar-
kets and assured sources of alternative liquidity. Issuers rated in the second
highest category generally have a strong capacity for repayment of short-term
promissory obligations.
Subsequent to its purchase by the Fund, an issue may cease to be rated or its
rating may be reduced below the minimum required for purchase by the Fund. Nei-
ther event requires the elimination of such obligation from the Fund's portfo-
lio, but Nuveen Advisory will consider such an event in its determination of
whether the Fund should continue to hold such obligation.
19
<PAGE>
MANAGEMENT
The management of the Fund, including general supervision of the duties per-
formed by Nuveen Advisory under the Investment Management Agreement, is the re-
sponsibility of its Board of Directors. There are eight directors of the Fund,
two of whom are "interested persons" (as the term "interested persons" is de-
fined in the Investment Company Act of 1940) and six of whom are "disinterested
persons." The names and business addresses of the directors and officers of the
Fund and their principal occupations and other affiliations during the past
five years are set forth below, with those directors who are "interested per-
sons" of the Fund indicated by an asterisk.
<TABLE>
- --------------------------------------------------------------------------------
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATION
NAME AND ADDRESS AGE OFFICES WITH FUND DURING PAST FIVE YEARS
- --------------------------------------------------------------------------------
<C> <C> <C> <S>
Timothy R. Schwertfeger* 49 Chairman of the Board Chairman since July 1,
333 West Wacker Drive and Director 1996 of The John Nuveen
Chicago, IL 60606 Company, John Nuveen &
Co. Incorporated, Nuveen
Advisory Corp. and
Nuveen Institutional
Advisory Corp., prior
thereto Executive Vice
President and Director
of The John Nuveen
Company and John Nuveen
& Co. Incorporated;
Director of Nuveen
Advisory Corp. (since
1992) and Nuveen
Institutional Advisory
Corp. (since October
1992); Chairman and
Director (since January
1997) of Nuveen Asset
Management, Inc.;
Director (since 1996) of
Institutional Capital
Corporation.
- --------------------------------------------------------------------------------
Anthony T. Dean* 53 President and President since July 1,
333 West Wacker Drive Director 1996 of The John Nuveen
Chicago, IL 60606 Company, John Nuveen &
Co. Incorporated, Nuveen
Advisory Corp. and
Nuveen Institutional
Advisory Corp.; prior
thereto, Executive Vice
President and
Director of The John
Nuveen Company, John
Nuveen & Co.
Incorporated, Nuveen
Advisory Corp. (since
October 1992) and Nuveen
Institutional Advisory
Corp. (since October
1992); President and
Director (since January
1997) of Nuveen Asset
Management, Inc.;
Chairman and Director
(since 1997) of
Rittenhouse Financial
Services, Inc.
- --------------------------------------------------------------------------------
Robert P. Bremner 57 Director Private Investor and
3725 Huntington Street, N.W. Management Consultant.
Washington, D.C. 20015
- --------------------------------------------------------------------------------
Lawrence H. Brown 63 Director Retired (August 1989) as
201 Michigan Avenue Senior Vice President of
Highwood, IL 60040 The Northern Trust
Company
- --------------------------------------------------------------------------------
Anne E. Impellizzeri 65 Director President and Chief
3 West 29th Street Executive Officer of
New York, NY 10001 Blanton-Peale,
Institutes of Religion
and Health (since
December 1990).
</TABLE>
- --------------------------------------------------------------------------------
20
<PAGE>
<TABLE>
- ----------------------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL OCCUPATIONS
NAME AND ADDRESS AGE POSITIONS AND OFFICES WITH FUND DURING PAST FIVE YEARS
- ----------------------------------------------------------------------------------------------
<C> <C> <C> <S>
Peter R. Sawers 65 Director Adjunct Professor of
22 The Landmark Business and Economics,
Northfield, IL 60093 University of Dubuque,
Iowa; Adjunct Professor,
Lake Forest Graduate
School of Management,
Lake Forest, Illinois.
- ----------------------------------------------------------------------------------------------
William J. Schneider 53 Director Senior Partner, Miller-
4000 Miller-Valentine Ct. Valentine Partners, Vice
P.O. Box 744 President, Miller-
Dayton, OH 45401 Valentine Realty, Inc.
- ----------------------------------------------------------------------------------------------
Judith M. Stockdale 50 Director Executive Director,
35 E. Wacker Drive Gaylord and Dorothy
Suite 2600 Donnelley Foundation
Chicago, IL 60601 (since 1994); prior
thereto, Executive
Director, Great Lakes
Protection Fund (from
1990 to 1994).
- --------------------------------------------------------------------------------
Bruce P. Bedford 58 Executive Vice President Executive Vice President
333 West Wacker Drive of John Nuveen & Co.
Chicago, IL 60606 Incorporated, Nuveen
Advisory Corp. and
Nuveen
Institutional Advisory
Corp. (since January
1997); prior thereto,
Chairman and CEO of
Flagship Resources Inc.
and Flagship Financial
Inc. and the Flagship
funds.
- --------------------------------------------------------------------------------
Alan G. Berkshire 37 Vice President and Assistant Secretary Vice President and
333 West Wacker Drive General Counsel (since
Chicago, IL 60606 September 1997) and
Secretary (since May
1998) of The John Nuveen
Company, John Nuveen &
Co. Incorporated, Nuveen
Advisory Corp. and
Nuveen Institutional
Advisory Corp., prior
thereto, Partner in the
law firm of Kirkland &
Ellis.
- --------------------------------------------------------------------------------
Michael S. Davern 40 Vice President Vice President of Nuveen
333 West Wacker Drive Advisory Corp. (since
Chicago, IL 60606 January 1997); prior
thereto, Vice President
and Portfolio Manager
(since September 1991)
of Flagship Financial.
- ----------------------------------------------------------------------------------------------
Lorna C. Ferguson 53 Vice President Vice President of John
333 West Wacker Drive Nuveen & Co.
Chicago, IL 60606 Incorporated; Vice
President (since January
1998) of Nuveen Advisory
Corp. and Nuveen
Institutional Advisory
Corp.
- ----------------------------------------------------------------------------------------------
William M. Fitzgerald 34 Vice President Vice President of Nuveen
333 West Wacker Drive Advisory Corp. (since
Chicago, IL 60606 December 1995);
Assistant Vice President
of Nuveen Advisory Corp.
(from September 1992 to
December 1995), prior
thereto Assistant
Portfolio Manager of
Nuveen Advisory Corp.
- ----------------------------------------------------------------------------------------------
Kathleen M. Flanagan 51 Vice President Vice President of John
333 West Wacker Drive Nuveen & Co.
Chicago, IL 60606 Incorporated.
- ----------------------------------------------------------------------------------------------
Stephen D. Foy 44 Vice President and Controller Vice President of John
333 West Wacker Drive Nuveen & Co.
Chicago, IL 60606 Incorporated.
</TABLE>
21
<PAGE>
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS
NAME AND ADDRESS AGE OFFICES WITH FUND DURING PAST FIVE YEARS
- -------------------------------------------------------------------------------
<C> <C> <C> <S>
J. Thomas Futrell 42 Vice President Vice President of Nuveen
333 West Wacker Drive Advisory Corp.
Chicago, IL 60606
- -------------------------------------------------------------------------------
Richard A. Huber 35 Vice President Vice President of Nuveen
333 West Wacker Drive Advisory Corp. (since January
Chicago, IL 60606 1997); prior thereto, Vice
President and Portfolio
Manager of Flagship Financial.
- -------------------------------------------------------------------------------
Steven J. Krupa 40 Vice President Vice President of Nuveen
333 West Wacker Drive Advisory Corp.
Chicago, IL 60606
- -------------------------------------------------------------------------------
Anna R. Kucinskis 52 Vice President Vice President of John Nuveen
333 West Wacker Drive & Co. Incorporated.
Chicago, IL 60606
- -------------------------------------------------------------------------------
Larry W. Martin 46 Vice President and Vice President, Assistant
333 West Wacker Drive Assistant Secretary Secretary and Assistant
Chicago, IL 60606 General Counsel of John Nuveen
& Co. Incorporated; Vice
President (since May 1993) and
Assistant Secretary of Nuveen
Advisory Corp.; Vice President
(since May 1993) and Assistant
Secretary of Nuveen
Institutional Advisory Corp.;
Assistant Secretary of The
John Nuveen Company.
- -------------------------------------------------------------------------------
Edward F. Neild, IV 32 Vice President Vice President (since
333 West Wacker Drive September 1996), previously
Chicago, IL 60606 Assistant Vice President
(since December 1993) of
Nuveen Advisory Corp.,
Portfolio Manager prior
thereto (since January 1992);
Vice President (since
September 1996), previously
Assistant Vice President
(since May 1995) of Nuveen
Institutional Advisory Corp.,
Portfolio Manager prior
thereto.
- -------------------------------------------------------------------------------
Walter K. Parker 49 Vice President Vice President of Nuveen
333 West Wacker Drive Advisory Corp. (since January
Chicago, IL 60606 1997); prior thereto, Vice
President and Portfolio
Manager (since July 1994) of
Flagship Financial; Portfolio
Manager and CIO Trust Investor
for PNC Bank.
- -------------------------------------------------------------------------------
Stephen S. Peterson 40 Vice President Vice President (since
333 West Wacker Drive September 1997), previously
Chicago, IL 60606 Assistant Vice President
(since September 1996) of
Nuveen Advisory Corp.,
Portfolio Manager prior
thereto.
- -------------------------------------------------------------------------------
Stuart W. Rogers 42 Vice President Vice President of John Nuveen
333 West Wacker Drive & Co. Incorporated.
Chicago, IL 60606
- -------------------------------------------------------------------------------
Thomas C. Spalding, Jr. 46 Vice President Vice President of Nuveen
333 West Wacker Drive Advisory Corp. and Nuveen
Chicago, IL 60606 Institutional Advisory Corp.;
Chartered Financial Analyst.
</TABLE>
- --------------------------------------------------------------------------------
22
<PAGE>
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS
NAME AND ADDRESS AGE OFFICES WITH FUND DURING PAST FIVE YEARS
- -------------------------------------------------------------------------------
<C> <C> <C> <S>
H. William Stabenow 63 Vice President and Vice President and Treasurer of
333 West Wacker Drive Treasurer The John Nuveen Company, John
Chicago, IL 60606 Nuveen & Co. Incorporated, Nuveen
Advisory Corp. and Nuveen
Institutional Advisory Corp.
- -------------------------------------------------------------------------------
William S. Swanson 32 Vice President Vice President of John Nuveen &
333 West Wacker Drive Co. Incorporated (since October
Chicago, IL 60606 1997), prior thereto, Assistant
Vice President (since September
1996); formerly, Associate of
John Nuveen & Co. Incorporated.
- -------------------------------------------------------------------------------
Jan E. Terbrueggen 42 Vice President Vice President Nuveen Advisory
333 West Wacker Drive Corp. (since January 1997);
Chicago, IL 60606 prior thereto, Vice President and
Portfolio Manager of Flagship
Financial.
- -------------------------------------------------------------------------------
Gifford R. Zimmerman 41 Vice President and Vice President (since September
333 West Wacker Drive Secretary 1992), Assistant Secretary and
Chicago, IL 60606 Associate General Counsel
formerly Assistant General
Counsel of John Nuveen & Co.
Incorporated; Vice President
(since May 1993) and Assistant
Secretary of Nuveen Advisory
Corp.; Vice President (since May
1993) and Assistant Secretary of
Nuveen Institutional Advisory
Corp.
</TABLE>
- --------------------------------------------------------------------------------
Anthony T. Dean, Timothy R. Schwertfeger and Peter R. Sawers serve as members
of the Executive Committee of the Board of Directors. The Executive Committee,
which meets between regular meetings of the Board of Directors, is authorized
to exercise all of the powers of the Board of Directors.
The directors of Nuveen California Tax-Free Fund, Inc. are directors or trust-
ees, as the case may be, of 42 Nuveen open-end fund portfolios and of 52 Nuveen
closed-end funds.
The following table sets forth compensation paid by the Nuveen California Tax-
Free Fund, Inc. during the fiscal year ended February 28, 1998 to each of the
directors. The Nuveen California Tax-Free Fund, Inc. has no retirement or pen-
sion plans. The officers and directors affiliated with Nuveen serve without any
compensation from the Nuveen California Tax-Free Fund, Inc.
<TABLE>
<CAPTION>
TOTAL COMPENSATION
AGGREGATE FROM THE FUND
COMPENSATION AND FUND COMPLEX
NAME OF DIRECTOR FROM THE FUND PAID TO DIRECTORS
- --------------------------------------------------------------------------------
<S> <C> <C>
Anthony T. Dean................................ $ 0 $ 0
Timothy R. Schwertfeger........................ 0 0
Robert P. Bremner.............................. 576 58,780
Lawrence H. Brown.............................. 603 76,000
Anne E. Impellizzeri........................... 574 71,750
Margaret K. Rosenheim*......................... 424(2) 47,405(3)
Peter R. Sawers................................ 574 71,750
William J. Schneider........................... 576 58,780
Judith M. Stockdale............................ 274 32,000(1)
</TABLE>
- --------
*Former trustee, retired July, 1997.
(1) First payment was in July, 1997.
(2) Includes $72 in interest earned on deferred compensation from prior years.
(3) Includes $1,655 in interest earned on deferred compensation from prior
years.
Each director who is not affiliated with Nuveen or Nuveen Advisory receives a
fee. Nuveen California Tax-Free Fund, Inc. requires no employees other than its
officers, all of whom are compensated by Nuveen.
23
<PAGE>
On May 19, 1998, the officers and directors of Nuveen California Tax-Free Fund,
Inc. as a group owned less than 1% of the outstanding shares of each Fund. The
following table sets forth the percentage ownership of each person who, as of
May 19, 1998, owned of record or was known by Nuveen California Tax-Free Fund,
Inc. to own of record or beneficially 5% or more of any class of shares of a
Fund.
<TABLE>
<CAPTION>
PERCENTAGE OF
NAME OF FUND AND CLASS NAME AND ADDRESS OF OWNER OWNERSHIP
- -------------------------------------------------------------------------------
<S> <C> <C>
California Money Market Fund
Institutional Series................. Alfred H & Beverlee L. 70.51%
Richter
TR UA2/2/84
Richter Family Trust
215 Oak Knoll Dr.
Glendora, CA
91741-3044
Wells Fargo Bank 24.15%
Funds Operations
MAC##0103-174
Attn.: Nancy Y. Wu
525 Market St Fl 17
San Francisco, CA 94105-
2708
California Money Market Fund
Service Plan Series.................. Republic Bank California 87.36%
N.A.
Attn.: Patsy Haynes
445 N. Bedford Dr.
Beverly Hills, CA 90210-
4302
Chase Manhattan Bank 5.26%
1211 Avenue of the
Americas
New York, NY 10036-8701
California Money Market Fund
Distribution Plan Series............. Eileen B. Geller & 9.27%
Andrew O. Geller TR
UA Sep. 02 87
Geller Family Trust
3297 Woodbine St.
Los Angeles, CA 90064-
4836
</TABLE>
24
<PAGE>
INVESTMENT ADVISER AND INVESTMENT MANAGEMENT AGREEMENT
Nuveen Advisory Corp. acts as investment adviser for and manages the investment
and reinvestment of the assets of the Fund. Nuveen Advisory also administers
Nuveen California Tax-Free Fund Inc.'s business affairs, provides office facil-
ities and equipment and certain clerical, bookkeeping and administrative serv-
ices, and permits any of its officers or employees to serve without compensa-
tion as trustees 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
Nuveen California Tax-Free Fund, Inc., the Fund has agreed to pay annual man-
agement fees at the rates set forth below:
<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSET
VALUE MANAGEMENT FEES
- -------------------------------------------
<S> <C>
For the first $500 million .400 of 1%
For the next $500 million .375 of 1%
For assets over $1 billion .350 of 1%
</TABLE>
Nuveen Advisory will waive all or a portion 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 .55 of 1% of the average daily net
asset value of the Fund. Nuveen Advisory may also voluntarily agree to reim-
burse additional expenses from time to time, which voluntary reimbursements may
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
----------------------- -----------------------
2/29/96 2/28/97 2/28/98 2/29/96 2/28/97 2/28/98
- ----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
600,017 665,655 539,739 59,354 70,133 82,256
</TABLE>
As discussed in the Prospectus, in addition to the management fees of Nuveen
Advisory, the Fund pays all other costs and expenses of its operations and the
general administrative expenses of Nuveen California Tax-Free Fund, Inc.
Nuveen Advisory is a wholly owned subsidiary of John Nuveen & Co. Incorporated
("Nuveen"), the Fund's principal underwriter. In 1961, Nuveen began sponsoring
the Nuveen Tax-Exempt Unit Trust and since that time has issued more than $37
billion in taxable and tax-exempt unit trusts, including over $12 billion in
tax-exempt insured unit trusts. In addition, Nuveen open-end and closed-end
funds held approximately $38 billion in securities under management as of the
date of this Statement. Over 1,000,000 individuals have invested to date in
Nuveen's funds and trusts. Founded in 1898, Nuveen is
25
<PAGE>
a subsidiary of The John Nuveen Company which, in turn, is approximately 78%
owned by The St. Paul Companies, Inc. ("St. Paul"). St. Paul is located in St.
Paul, Minnesota, and is principally engaged in providing property-liability in-
surance 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, a Fund's anticipated or actual portfolio transactions, and is designed
to assure that the interest of Fund shareholders are placed before the interest
of Nuveen personnel in connection with personal investment transactions.
PORTFOLIO TRANSACTIONS
Nuveen Advisory, in effecting purchases and sales of portfolio securities for
the account of the Fund, will place orders in such manner as, in the opinion of
management, will offer the best price and market for the execution of each
transaction. Portfolio securities will normally be purchased directly from an
underwriter or in the over-the-counter market from the principal dealers in
such securities, unless it appears that a better price or execution may be ob-
tained elsewhere. Portfolio securities will not be purchased from Nuveen or its
affiliates except in compliance with the Investment Company Act of 1940.
The Fund expects that all portfolio transactions will be effected on a princi-
pal (as opposed to an agency) basis and, accordingly, do not expect to pay any
brokerage commissions. Purchases from underwriters will include a commission or
concession paid by the issuer to the underwriter, and purchases from dealers
will include the spread between the bid and asked price. Given the best price
and execution obtainable, it will be the practice of the Fund to select dealers
which, in addition, furnish research information (primarily credit analyses of
issuers and general economic reports) and statistical and other services to
Nuveen Advisory. It is not possible to place a dollar value on information and
statistical and other services received from dealers. Since it is only supple-
mentary to Nuveen Advisory's own research efforts, the receipt of research in-
formation is not expected to reduce significantly Nuveen Advisory's expenses.
While Nuveen Advisory will be primarily responsible for the placement of the
business of the Fund, the policies and practices of Nuveen Advisory in this re-
gard must be consistent with the foregoing and will, at all times, be subject
to review by the Board of Directors.
Nuveen Advisory reserves the right to, and does, manage other investment ac-
counts and investment companies for other clients, which may have investment
objectives similar to the Fund. Subject to applicable laws and regulations,
Nuveen Advisory will attempt to allocate equitably portfolio transactions among
the Fund and the portfolios of its other clients purchasing or selling securi-
ties whenever decisions are made to purchase or sell securities by the Fund and
one or more of such other clients simultaneously. In making such allocations
the main factors to be considered will be the respective
26
<PAGE>
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 recommending investments to the Fund and such other
clients. While this procedure could have a detrimental effect on the price or
amount of the securities available to the Fund from time to time, it is the
opinion of the Board of Directors that the benefits available from Nuveen
Advisory's organization will outweigh any disadvantage that may arise from
exposure 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 terms of an issue of Munici-
pal Obligations purchased by the Fund, the amount of Municipal Obligations
which may be purchased in any one issue and the assets of the Fund which may be
invested in a particular issue. In addition, purchases of securities made pur-
suant to the terms of the Rule must be approved at least quarterly by the Board
of Directors, including a majority of the directors who are not interested per-
sons 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 shares by The Chase Manhattan Bank,
the Fund's Custodian. Net asset value will be determined as of 12:00 noon East-
ern Time (9:00 a.m. Pacific time) on each day on which the Federal Reserve Bank
of Boston is normally open for business and on any other day during which there
is a sufficient degree of trading in the portfolio securities held by the Fund
that the current net asset value of the Fund's shares might be materially af-
fected by changes in the value of the securities held by the Fund. The Exchange
is not open for trading on New Year's Day, Washington's Birthday, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
The Federal Reserve Bank of Boston is also not open for business on these days
(except for Good Friday) as well as Martin Luther King's Birthday, Columbus Day
and Veterans Day. The net asset value per share of a class of shares of the
Fund will be computed by dividing the value of the portfolio securities held by
the Fund plus cash or other assets, less liabilities, by the number of shares
of the class outstanding.
The Fund seeks to maintain a net asset value of $1.00 per share. In this con-
nection, the Fund values its portfolio securities at their amortized cost, as
permitted under the rules and regulations of the Securities and Exchange Com-
mission under the Investment Company Act of 1940. This method does not take
into account unrealized securities gains or losses. It involves valuing an in-
strument at its cost on the date of purchase and thereafter assuming a constant
amortization to maturity of any discount or premium. While this method provides
certainty in valuation, it may result in periods during which the value of an
investment, as determined by amortized cost, is higher or lower than the price
the Fund would receive if it sold the instrument. During periods of declining
interest rates, the daily yield on shares held by the Fund may tend to be
higher than a like computation made by a fund with identical investments util-
izing a method of valuation based upon market prices and estimates of market
prices for
27
<PAGE>
all of its fund instruments. Thus, if the use of the amortized cost method by
the Fund resulted in a lower aggregate portfolio value on a particular day, a
prospective investor in the Fund would be able to obtain a somewhat higher
yield than would result from an investment in a fund utilizing solely market
values, and existing investors in the Fund would receive less investment in-
come. 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 Money Market 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 regula-
tions 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 Securities and Exchange Commission for money market funds, to redeem upon
specified notice at par, or both.
The Board of Directors, pursuant to the requirements of the rule permitting am-
ortized cost valuation, has established procedures designed to stabilize, to
the extent reasonably possible, the Money Market Fund's price per share as com-
puted for the purpose of sales and redemptions at $1.00. Such procedures will
include review of the holdings of the Money Market Fund by the Board of Direc-
tors, 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 Directors. 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 investments in the Fund based on methods which include consider-
ation of: yield or prices of municipal obligations of comparable quality, cou-
pon, maturity and type; indications as to value from dealers; and general mar-
ket conditions. The pricing agent may employ electronic data processing tech-
niques and/or a matrix system to determine valuations. The extent of any devia-
tion between the Money Market 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 Directors. If such deviation were to exceed 1/2 of 1%,
the Board of Directors would promptly consider what action, if any, would be
initiated. In the event the Board of Directors determines that a deviation ex-
ists which may result in material dilution or other unfair results to investors
or existing shareholders, it has agreed to take such corrective action as it
regards as necessary and appropriate, including the sale of portfolio instru-
ments prior to maturity to realize capital gains or losses or to shorten aver-
age portfolio maturity; withholding dividends or payment of distributions from
capital or capital gains; redemption of shares in kind; or establishing a net
asset value per share by using available market quotations.
28
<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 qual-
ify as a regulated investment company, the Fund must satisfy certain require-
ments relating to the source of its income, diversification of its assets, and
distributions of its income to shareholders. First, the Fund must derive at
least 90% of its annual gross income (including tax-exempt interest) from divi-
dends, interest, payments with respect to securities loans, gains from the sale
or other disposition of stock or securities, foreign currencies or other income
(including but not limited to gains from options and futures) derived with re-
spect to its business of investing in such stock or securities (the "90% gross
income test"). Second, the Fund must diversify its holdings so that, at the
close of each quarter of its taxable year, (i) at least 50% of the value of its
total assets is comprised of cash, cash items, United States Government securi-
ties, securities of other regulated investment companies and other securities
limited in respect of any one issuer to an amount not greater in value than 5%
of the value of the Fund's total assets and to not more than 10% of the out-
standing voting securities of such issuer, and (ii) not more than 25% of the
value of its total assets is invested in the securities of any one issuer
(other than United States Government securities and securities of other regu-
lated investment companies) or two or more issuers controlled by the Fund and
engaged in the same, similar or related trades or businesses.
As a regulated investment company, the Fund will not be subject to federal in-
come tax on the portion of its net income currently distributed to shareholders
in any taxable year for which it distributes at least 90% of the sum of (i) its
"investment company taxable income" (which includes dividends, taxable inter-
est, taxable original issue discount and market discount income, income from
securities lending, net short-term capital gain in excess of long-term capital
loss, and any other taxable income other than "net capital gain" (the excess of
its net long-term capital gains over its net short-term capital loss) and is
reduced by deductible expenses) and (ii) its "net tax-exempt interest" (the ex-
cess of its gross tax-exempt interest income over certain disallowed deduc-
tions).
The Fund also intends to satisfy conditions (including requirements as to the
proportion of its assets invested in Municipal Obligations) that will enable it
to designate distributions from the interest income generated by investments in
Municipal Obligations, which is exempt from regular federal income tax when re-
ceived by the Fund, as exempt-interest dividends. Shareholders receiving ex-
empt-interest dividends will not be subject to regular federal income tax on
the amount of such dividends.
Distributions by the Fund of net interest received from certain taxable tempo-
rary investments (such as certificates of deposit, commercial paper and obliga-
tions 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
29
<PAGE>
shareholders as ordinary income whether received in cash or additional
shares./1/ If the Fund purchases a Municipal Obligation at a market discount,
any gain realized by the Fund upon sale or redemption of the Municipal
Obligation will be treated as a taxable in-terest income to the extent such gain
does not exceed the market discount, and any gain realized in excess of the
market discount will be treated as capital gains. Any net long-term capital
gains realized by the Fund and distributed to shareholders in cash or in
additional shares will be taxable to shareholders as long-term capital gains
regardless of the length of time investors have owned shares of the Fund. The
Fund does not expect to realize significant long-term capital gains.
Because the taxable portion of the Fund's investment income consists primarily
of interest, none of its dividends, whether or not treated as exempt-interest
dividends, is expected to qualify under the Internal Revenue Code for the divi-
dends received deductions for corporations.
Although dividends generally will be treated as distributed when paid, divi-
dends declared in October, November or December, payable to shareholders of
record on a specified date in one of those months and paid during the following
January, will be treated as having been distributed by the Fund (and received
by the shareholders) on December 31.
The redemption or exchange of the shares of the Fund is not expected to result
in capital gain or loss to the shareholders because the Fund's net asset value
is expected to remain constant at $1.00 per share. To the extent that the
Fund's net asset value is greater or lesser than $1.00 per share, redemptions
or exchanges may result in capital gain or loss to the shareholder.
In order to avoid a 4% federal excise tax, the Fund must distribute or be
deemed to have distributed by December 31 of each calendar year at least 98% of
its taxable ordinary income for such year, at least 98% of the excess of its
realized capital gains over its realized capital losses (generally computed on
the basis of the one-year period ending on October 31 of such year) and 100% of
any taxable ordinary income and the excess of realized capital gains over real-
ized capital losses for the period year that was not distributed during such
year and on which the Fund paid no federal income tax. For purposes of the ex-
cise tax, a regulated investment company may reduce its capital gain net income
(but not below its net capital gain) by the amount of any net ordinary loss for
the calendar year in determining the amount of ordinary taxable income for the
current calendar year (and, instead, include such gains and losses in determin-
ing ordinary taxable income for the succeeding calendar year). The Fund intends
to make timely distributions in compliance with these requirements and conse-
quently it is anticipated that it generally will not be required to pay the ex-
cise tax.
- --------
/1/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 ap-
plied uniformly to all distributions made during the Fund's taxable year.
The percentage of income designated as tax-exempt for any particular distri-
bution may be substantially different from the percentage of the Fund's in-
come that was tax-exempt during the period covered by the distribution.
30
<PAGE>
If in any year the Fund should fail to qualify under Subchapter M for tax
treatment as a regulated investment company, the Fund would incur a regular
corporate federal income tax upon its income for that year (other than interest
income from Municipal Obligations) and distributions to its shareholders would
be taxable to shareholders as ordinary dividend income for federal income tax
purposes to the extent of the Fund's available earnings and profits.
Because the Fund may invest in private activity bonds, the interest on which is
not federally tax-exempt to persons who are "substantial users" of the facili-
ties financed by such bonds or "related persons" of such "substantial users,"
the Fund may not be an appropriate investment for shareholders who are consid-
ered either a "substantial user" or a "related person" within the meaning of
the Code. For additional information, investors should consult their tax advis-
ers before investing in the Fund.
Federal tax law imposes an alternative minimum tax with respect to both corpo-
rations and individuals. Interest on certain Municipal Obligations, such as
bonds issued to make loans for housing purposes or to private entities (but not
for certain tax-exempt organizations such as universities and non-profit hospi-
tals), is included as an item of tax preference in determining the amount of a
taxpayer's alternative minimum taxable income. To the extent that the Fund re-
ceives income from Municipal Obligations subject to the alternative minimum
tax, a portion of the dividends paid by it, although otherwise exempt from fed-
eral income tax, will be taxable to shareholders to the extent that their tax
liability is determined under the alternative minimum tax regime. The Fund will
annually supply shareholders with a report indicating the percentage of the
Fund income attributable to Municipal Obligations subject to the federal alter-
native minimum tax.
In addition, the alternative minimum taxable income for corporations is in-
creased by 75% of the difference between an alternative measure of income ("ad-
justed current earnings") and the amount otherwise determined to be the alter-
native minimum taxable income. Interest on all Municipal Obligations, and
therefore all distributions by the Fund that would otherwise be tax exempt, is
included in calculating a corporation's adjusted current earnings.
Tax-exempt income, including exempt-interest dividends paid by the Fund, will
be added to the taxable income of individuals receiving social security or
railroad retirement benefits in determining whether a portion of that benefit
will be subject to federal income tax.
The Code provides that interest on indebtedness incurred or continued to pur-
chase or carry shares of any Fund is not deductible. Under rules used by the
IRS for determining when borrowed funds are considered used for the purpose of
purchasing or carrying particular assets, the purchase of shares of the Fund
may be considered to have been made with borrowed funds even though such funds
are not directly traceable to the purchase of shares.
The Fund is required in certain circumstances to withhold 31% of taxable divi-
dends and certain other payments paid to non-corporate holders of shares who
have not furnished to the Fund their correct taxpayer identification number (in
the case of individuals, their social security number) and certain certifica-
tions, or who are otherwise subject to back-up withholding.
31
<PAGE>
The foregoing is a general and abbreviated summary of the provisions of the
Code and Treasury Regulations presently in effect as they directly govern the
taxation of the Fund and their shareholders. For complete provisions, reference
should be made to the pertinent Code sections and Treasury Regulations. The
Code and Treasury Regulations are subject to change by legislative or adminis-
trative action, and any such change may be retroactive with respect to Fund
transactions. Shareholders are advised to consult their own tax advisers for
more detailed information concerning the federal taxation of the Fund and the
income tax consequences to their shareholders.
CALIFORNIA STATE AND LOCAL TAX MATTERS
The following is based upon the advice of Morgan, Lewis & Bockius LLP, Washing-
ton, D.C., counsel to the Fund, and assumes that the Fund will be qualified as
a regulated investment company under Subchapter M of the Code and will be qual-
ified thereunder to pay exempt interest dividends.
Individual shareholders of the Fund who are subject to California personal in-
come taxation will not be required to include in their California gross income
that portion of their federally tax-exempt dividends which (1) the Fund desig-
nates as California exempt-interest dividends in a written notice mailed to the
shareholders not later than 60 days after the close of the Fund's taxable year,
and (2) to the extent that the interest received by the Fund during the year on
obligations, the interest on which would be exempt from California personal in-
come tax if the obligations were held by individuals, exceeds expenses of the
Fund which would be disallowed under California personal income tax law as al-
locable to tax exempt interest if the Fund were an individual. In addition, at
least 50 percent of the value of the Fund's total assets consists of obliga-
tions the interest on which is exempt from California personal income taxation.
Gain or loss, if any, resulting from an exchange or redemption of shares will
be recognized in the year of the exchange or redemption. Present California law
taxes both long-term and short-term capital gains on the exchange or redemption
of shares at rates applicable to ordinary income. Interest on indebtedness in-
curred or continued by a shareholder in connection with the purchase of shares
of the Fund will not be deductible for California personal income tax purposes.
California has an alternative minimum tax similar to the federal alternative
minimum tax described above. However, the California alternative minimum tax
does not include interest from specified private activity bonds as an item of
tax preference.
Generally corporate shareholders of the Fund subject to the California fran-
chise tax will be required to include any gain on an exchange or redemption of
shares and all distributions of exempt-interest, capital gains and other tax-
able income, if any, as income subject to such tax.
The Fund will not be subject to California franchise or corporate income tax on
interest income or net capital gain distributed to the shareholders.
Shares of the Fund will be exempt from ad valorem taxes in California.
The foregoing is a general, abbreviated summary of certain of the provisions of
the California Revenue and Taxation Code presently in effect as it directly
governs the taxation of shareholders of the Fund. These provisions are subject
to change by legislative or administrative action, and any such change may
32
<PAGE>
be retroactive with respect to Fund transactions. Shareholders are advised to
consult with their own tax advisers for more detailed information concerning
California tax matters.
YIELD INFORMATION
As explained in the Money Market Fund Prospectus, the historical performance of
a series of the Money Market Fund may be expressed in terms of "yield," "effec-
tive yield" or "taxable equivalent yield." Each series' yield is computed in
accordance with a standard method prescribed by rules of the Securities and Ex-
change Commission. Under that method, current yield is based on a seven-day pe-
riod and is computed as follows: the series' net investment income per share
for the period is divided by the price per share (expected to remain constant
at $1.00) at the beginning of the period, the result (the "base period return")
is divided by seven and multiplied by 365, and the resulting figure is carried
to the nearest hundredth of one percent. For the purpose of this calculation,
the series' net investment income per share includes its accrued interest in-
come plus or minus amortized purchase discount or premium less accrued ex-
penses, but does not include realized capital gains or losses or unrealized ap-
preciation or depreciation of investments.
A series' 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. Based on
the seven-day period ended February 28, 1998, the yield and effective yield for
the Service and Distribution Plan series of the Money Market Fund were 3.03%
and 3.08%, respectively, and for the Institutional series were 3.14% and 3.19%,
respectively.
A series' taxable equivalent yield is computed by dividing that portion of the
series' yield which is tax-exempt by 1 minus the stated combined federal and
state income tax rate and adding the result to that portion, if any, of the
yield of the series that is not tax-exempt. Based upon (1) a combined 1996 fed-
eral and California income tax of 45.2%, and (2) the yield for the Money Market
Fund as described above for the seven-day period ended February 28, 1998, the
taxable equivalent yield for the Service and Distribution Plan series of the
Money Market Fund for that period was 5.53% and for the Institutional series
the taxable equivalent yield was 5.73%.
Each series' yield will fluctuate, and the publication of annualized yield quo-
tations is not a representation of what an investment in the series will actu-
ally yield for any given future period. Actual yields will depend not only on
changes in interest rates on money market instruments during the period in
question, but also on such matters as the expenses attributable to the series.
33
<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>
3.00% 3.50 % 4.00% 4.50% 5.00% 5.50 % 6.00% 6.50%
1.50% 2.00% 2.50% TAX- TAX- TAX- TAX- TAX- TAX- TAX- TAX-
TAXABLE TAX-FREE TAX-FREE TAX-FREE FREE FREE FREE FREE FREE FREE FREE FREE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2.00% $ 46,000 $ 34,500 $ 27,600 $23,000 $19,714 $17,250 $15,333 $13,800 $12,545 $11,500 $10,615
- ------------------------------------------------------------------------------------------------------
2.50% $ 57,500 $ 43,125 $ 34,500 $28,750 $24,643 $21,563 $19,167 $17,250 $15,682 $14,375 $13,269
- ------------------------------------------------------------------------------------------------------
3.00% $ 69,000 $ 51,750 $ 41,400 $34,500 $29,571 $25,875 $23,000 $20,700 $18,818 $17,250 $15,923
- ------------------------------------------------------------------------------------------------------
3.50% $ 80,500 $ 60,375 $ 48,300 $40,250 $34,500 $30,188 $26,833 $24,150 $21,955 $20,125 $18,262
- ------------------------------------------------------------------------------------------------------
4.00% $ 92,000 $ 69,000 $ 55,200 $46,000 $39,429 $34,500 $30,667 $27,600 $25,091 $23,000 $21,231
- ------------------------------------------------------------------------------------------------------
4.50% $103,500 $ 77,625 $ 62,100 $51,750 $44,357 $38,813 $34,500 $31,050 $28,227 $25,875 $23,884
- ------------------------------------------------------------------------------------------------------
5.00% $115,000 $ 86,250 $ 69,000 $57,500 $49,286 $43,125 $38,333 $34,500 $31,364 $28,750 $26,538
- ------------------------------------------------------------------------------------------------------
5.50% $126,500 $ 94,875 $ 75,900 $63,250 $54,214 $47,437 $42,167 $37,950 $34,500 $31,625 $29,192
- ------------------------------------------------------------------------------------------------------
6.00% $138,000 $103,500 $ 82,800 $69,000 $59,143 $51,750 $46,000 $41,400 $37,636 $34,500 $31,846
- ------------------------------------------------------------------------------------------------------
6.50% $149,500 $112,125 $ 89,700 $74,750 $64,071 $56,062 $49,833 $44,850 $40,773 $37,375 $34,500
- ------------------------------------------------------------------------------------------------------
7.00% $161,000 $120,750 $ 96,600 $80,500 $69,000 $60,375 $53,667 $48,300 $43,909 $40,250 $37,154
- ------------------------------------------------------------------------------------------------------
7.50% $172,500 $129,375 $103,500 $86,250 $73,929 $64,688 $57,500 $51,750 $47,045 $43,125 $39,808
- ------------------------------------------------------------------------------------------------------
8.00% $184,000 $138,000 $110,400 $92,000 $78,857 $69,000 $61,333 $55,200 $50,182 $46,000 $42,462
- ------------------------------------------------------------------------------------------------------
</TABLE>
*The dollar amounts in the table reflect a 31% federal income tax rate.
This table is for illustrative purposes only and is not intended to predict the
actual return you might earn on your investment. The Money Market Fund occa-
sionally may advertise its performance in similar tables using a different cur-
rent 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 dol-
lar 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.
34
<PAGE>
ADDITIONAL INFORMATION ON THE PURCHASE AND REDEMPTION OF FUND SHARES
Shares of the Fund may be purchased at the net asset value which is next com-
puted after receipt of an order and receipt of payment in federal funds. Shares
of the Fund are issued in three series: (i) the Service Plan series, (ii) the
Distribution Plan series, and (iii) the Institutional series. There is no sales
charge on purchases of shares of any series of the Fund.
Shares of the Nuveen Money Market Funds may be purchased on days on which the
Federal Reserve Bank of Boston is normally open for business. The Nuveen Money
Market Funds observe and will not make fund shares available for purchase on
the following holidays: New Year's Day, Martin Luther King's Birthday, Washing-
ton's Birthday, Good Friday, Memorial Day, Independence Day, Labor Day,
Columbus Day, Veterans Day, Thanksgiving Day and Christmas Day.
DISTRIBUTION AND SERVICE PLAN
As discussed in the Prospectus under "How to Purchase Fund Shares--Distribution
and Service Plan," the Fund has adopted Distribution and Service Plans (the
"Plan") with respect to the shares of the Distribution Plan series and the
Service Plan series. The Distribution Plan was adopted pursuant to Rule 12b-1
of the 1940 Act while the Service Plan, although containing comparable terms,
is not a Rule 12b-1 plan. The Plans were adopted by a vote of the Board of Di-
rectors, including a majority of the directors who are not interested persons
and who have no direct or indirect financial interest in the operation of the
Plan. Under the Plan, the Distribution Plan series and the Service Plan series
of the Fund and Nuveen pay fees (i) in the case of the Service Plan series, to
banks and other organizations described in the Prospectus for the servicing of
accounts of shareholders of such series and (ii) in the case of the Distribu-
tion Plan series, to securities dealers for services rendered in the distribu-
tion of the shares of such series. In each case, such services may include,
among other things, establishing and maintaining shareholder accounts, process-
ing purchase and redemption transactions, arranging for bank wires, performing
sub-accounting, answering shareholder inquiries and such other services as
Nuveen may request. Payments to such securities dealers and banks or other or-
ganizations will be at the rate of .25 of 1% per year of the daily average as-
sets of serviced accounts. Such amounts will be paid one-half by the Service
Plan series and the Distribution Plan series of the Fund and one-half by
Nuveen. In addition, Nuveen may, in its discretion and from its own resources,
pay to organizations that satisfy certain criteria an additional amount not to
exceed .05 of 1% per year based on average assets of accounts serviced by such
organizations. For the fiscal year ended February 28, 1998, the Fund paid fees
to banks and other organizations under the Service Plan in the amount of
$78,990 and paid fees to securities dealers under the Distribution Plan in the
amount of $62,307.
Under the Plan, the Controller of Nuveen California Tax-Free Fund, Inc. will
report quarterly to the Board of Directors for its review of amounts expended
for services rendered under the Plan. The Plan may be terminated at any time,
without the payment of any penalty, by a vote of a majority of the directors
who are not "interested persons" and who have no direct or indirect financial
interest in the Plan or by vote of a majority of the outstanding voting securi-
ties of the applicable series of the Fund. The Plan may be renewed from year to
year if approved by a vote of the Board of Directors and a vote of
the non-interested directors who have no direct or indirect financial interest
in the Plan cast in person at
35
<PAGE>
a meeting called for the purpose of voting on the Plan. The Plan may be con-
tinued only if the directors who vote to approve such continuance conclude, in
the exercise of reasonable business judgment and in light of their fiduciary
duties under applicable law, that there is a reasonable likelihood that the
Plan will benefit such series of the Fund and its shareholders. The Plan may
not be amended to increase materially the cost which the Distribution Plan or
the Service Plan series of the Fund may bear without the approval of the
shareholders of the affected series of that Fund. Any other material amend-
ments of the Plans must be approved by the non-interested directors by a vote
cast in person at a meeting called for the purpose of considering such amend-
ments. During the continuance of the Plan, as required by the Rule, the selec-
tion and nomination of the non-interested directors will be committed to the
discretion of the non-interested directors then in office.
Neither any director nor any "interested" person of Nuveen California Tax-Free
Fund, Inc., has any direct or indirect financial interest in the Plan.
Shareholders should note that when a Fund dividend check has been returned to
the sender by the post office after repeated mailings, the shareholder account
will thereafter be registered for automatic reinvestment of dividends and thus
the dividend check and future dividend checks will be reinvested in additional
Fund shares. Shareholders are reminded that they need to advise the Fund
promptly in writing of any change in address.
The Glass-Steagall Act and other applicable laws, among other things, may
limit banks from engaging in the business of underwriting, selling or distrib-
uting securities. Since the only functions of banks who may be engaged as
Service Organizations is to perform administrative shareholder servicing func-
tions, Nuveen California Tax-Free Fund, Inc. believes that such laws should
not preclude a bank from acting as a Service Organization. However, future
changes in either federal or state statutes or regulations relating to the
permissible activities of banks and their subsidiaries or affiliates, as well
as judicial or administrative decisions or interpretations of statutes or reg-
ulations, could prevent a bank from continuing to perform all or a part of its
shareholder servicing activities. If a bank were prohibited from so acting,
its shareholder customers would be permitted to remain shareholders of the
Fund and alternative means for continuing the servicing of such shareholders
would be sought.
Nuveen serves as the principal underwriter of the shares of the Fund pursuant
to a "best efforts" arrangement as provided by a distribution agreement with
the Nuveen California Tax-Free Fund, Inc., dated January 2, 1990 and last re-
newed on July 31, 1997 ("Distribution Agreement"). Pursuant to the Distribu-
tion Agreement, the Nuveen California Tax-Free Fund, Inc. appointed Nuveen to
be its agent for the distribution of the Fund's shares on a continuous offer-
ing basis. Nuveen sells shares to or through brokers, dealers, banks or other
qualified financial intermediaries (collectively referred to as "Dealers"), or
others, in a manner consistent with the then effective registration statement
of the Nuveen California Tax-Free Fund, Inc. Pursuant to the Distribution
Agreement, Nuveen, at its own expense, finances certain activities incident to
the sale and distribution of the Fund's shares, including printing and dis-
tributing 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.
Nuveen receives for its services the excess, if any, of the sales price of the
Fund's shares less the net asset value of those shares, and reallows a major-
ity or all of such amounts to the Dealers who sold the shares; Nuveen may act
as such a Dealer.
36
<PAGE>
INDEPENDENT PUBLIC ACCOUNTANTS AND CUSTODIAN
Arthur Andersen LLP, independent public accountants, 33 W. Monroe Street, Chi-
cago, Illinois 60603 have been selected as auditors for the Fund. In addition
to audit services, Arthur Andersen LLP will provide consultation and assistance
on accounting, internal control, tax and related matters. The financial state-
ments incorporated by reference elsewhere in this Statement of Additional In-
formation and the information set forth under "Financial Highlights" in the
Prospectus have been audited by Arthur Andersen LLP as indicated in their re-
port with respect thereto, and are included in reliance upon the authority of
said firm as experts in given said report.
The custodian of the assets of the Fund is The Chase Manhattan Bank, 4 New York
Plaza, New York, NY 10004. The Custodian performs custodial, fund accounting
and portfolio accounting services.
37
<PAGE>
NUVEEN
Money Market
Funds
February 28, 1998
Annual Report
Dependable, tax-free income
to help you keep more of
what you earn.
[PHOTO APPEARS HERE]
Reserves
California
Massachusetts
New York
<PAGE>
Contents
1 Dear Shareholder
3 Reserves Performance Overview
4 California Performance Overview
5 Massachusetts Performance Overview
6 New York Performance Overview
7 Portfolio of Investments
18 Statement of Net Assets
20 Statement of Operations
24 Statement of Changes in Net Assets
31 Notes to Financial Statements
34 Financial Highlights
42 Report of Independent Public Accountants
44 Building Better Portfolios
45 Fund Information
<PAGE>
Dear Shareholder
[PHOTO OF TIMOTHY R. SCHWERTFEGER APPEARS HERE]
Timothy R. Schwertfeger
Chairman of the Board
Over the past two years, many financial markets have been unusually strong.
Short-term rates trended higher early in 1997 on expectations that the Federal
Reserve Board would take steps to tighten monetary policy and slow the pace of
economic growth. In March, the Fed raised its target rate for the federal funds
rate by 25 basis points, but then took no further action. Short-term securities
reversed course and yields trended downward for the remainder of the funds'
fiscal year. Still, falling commodity prices kept producer prices in check,
while low import prices--due in part to the weakness in Asian markets--limited
U.S. companies' ability to raise consumer prices. This combination has kept
inflation subdued and the Federal Reserve "on hold".
Performance Review
Your Nuveen tax-free money market fund continued to generate tax-free income
while preserving net asset value stability. As of the end of February, investors
were receiving 7-day annualized tax-free yields that ranged from 2.75% to 3.04%,
equivalent to taxable yields of between 3.99% and 4.41% for investors in the 31%
federal income tax bracket. When state taxes are taken into account, the
advantage of tax-free investing is even more apparent.
Portfolio Adjustments
Beginning in the fourth quarter of 1997, many Asian countries experienced
economic problems and severe currency devaluations. We continue to watch the
Asian situation--and Japanese banks in particular--for any additional credit
erosions and possible rating changes.
During this time, the Nuveen Money Market Funds, working with Nuveen Research,
continued to closely monitor those issues in the portfolios that were
additionally secured by letters of credit from Japanese banks. While others were
eliminating all Japanese-bank letters of credit, the funds maintained their
current positions based on our credit analysis.
With the funds' maturities averaging between 30 and 58 days, we were able to
selectively participate in the large new issue municipal note
Wealth takes
a lifetime
to build.
Once achieved,
it should be
preserved.
1
<PAGE>
"Nuveen
money market
funds provide
an excellent
balance to
other stock
and bond
investments."
calendar. During the third quarter of 1997, many short-term buyers seemed
reluctant to extend their average maturities, expecting the Federal Reserve to
raise rates. The funds were able to buy tax-exempt notes at historically cheap
levels which proved to be a wise move since the Fed did not raise rates. As a
result, the funds' average maturities during the third quarter of 1997 were
generally increased to the upper end of their ranges.
Short-Term Outlook
Looking forward, it's likely that upward pressure on wages may ultimately push
inflation up a bit. It's still uncertain whether the Fed will deem it necessary
to raise short-term rates, and if they hold the line, money market rates should
remain relatively stable in 1998.
Helping You Build A Better Portfolio
The events of 1997 have also focused renewed attention on the need for
diversification and appropriate asset allocation. In addition to their well-
known benefits--stability of principal and higher yields than bank accounts--
money market funds can also play an important role in your long-term investment
plan. Stock market volatility, especially late in the year, provided a vivid
illustration of the steadying effect that short-term investments can provide in
a well-constructed investment portfolio. Nuveen money market funds provide an
excellent balance to other stock and bond investments. Your financial adviser
can introduce you to a variety of other Nuveen products and services to round
out your portfolio of core investments, including the new Nuveen Rittenhouse
Growth Fund, a blue chip equity mutual fund that provides a tax-efficient
approach to building and sustaining wealth.
On behalf of everyone at Nuveen, I thank you for your continued confidence in us
and our family of investments.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
April 15, 1998
2
<PAGE>
Nuveen Tax-Free Reserves, Inc.
Performance Overview
As of February 28, 1998
Fund Highlights
Inception Date 11/82
Net Assets ($000) $270,723
Average Weighted Maturity (Days) 42.1
- ----------------------------------------------------------
Tax-Free Yields
SEC 7-Day Yield 2.86%
SEC 30-Day Yield 2.75%
- ----------------------------------------------------------
Taxable Equivalent Yields
SEC 7-Day Yield 4.14%
SEC 30-Day Yield 3.99%
- ----------------------------------------------------------
Based on a federal tax rate of 31%; represents the yield from a taxable
investment necessary to equal the yield of the Nuveen fund on an after-tax
basis.
Top 5 Sectors
Health Care 18%
Utilities 18%
Tax Obligation (General) 16%
Long Term Care 10%
Tax Obligation (Limited) 7%
- ----------------------------------------------------------
1997-1998 Index Comparison
[MOUNTAIN CHART APPEARS HERE]
- --------------------------------------------------------------------------------
1997-1998 Index Comparison
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
IBC Donoghue Retail Tax-Exempt Money Market Fund Average Nuveen Tax-Free Reserves, Inc. 30-Day Yield
<S> <C> <C>
Feb 2.81 2.83
Mar 2.68 2.71
Apr 3.02 3.07
May 3.33 3.36
Jun 3.2 3.22
Jul 3.02 3.04
Aug 2.95 2.94
Sep 3.07 3.1
Oct 3.05 3.09
Nov 3.11 3.16
Dec 3.12 3.17
Jan 2.99 3.01
Feb 2.74 2.77
</TABLE>
[_] IBC Donoghue Retail Tax-Exempt Money Market Fund Average
[_] Nuveen Tax-Free Reserves, Inc. 30-Day Yield
Past performance is not predictive of future performance.
3
<PAGE>
Nuveen California Tax-Free Money Market Fund
Performance Overview
As of February 28, 1998
Fund Highlights
Inception Date 3/86
Net Assets ($000) $160,495
Average Weighted Maturity (Days) 30.1
- ----------------------------------------------------------
Tax-Free Yields
SEC 7-Day Yield 3.04%
SEC 30-Day Yield 2.85%
- ----------------------------------------------------------
Taxable Equivalent Yields
SEC 7-Day Yield 4.86%
SEC 30-Day Yield 4.55%
- ----------------------------------------------------------
Based on a combined federal and state income tax rate of 37.4%; represents the
yield from a taxable investment necessary to equal the yield of the Nuveen fund
on an after-tax basis.
Top 5 Sectors
Tax Obligation (Limited) 25%
Water and Sewer 19%
Housing (Multifamily) 15%
Health Care 14%
Tax Obligation (General) 12%
- ----------------------------------------------------------
1997-1998 Index Comparison
[MOUNTAIN CHART APPEARS HERE]
<TABLE>
<CAPTION>
IBC Donoghue California
Nuveen California Retail Tax-Exempt Money Market
30-Day Yield Fund Average
----------------- ------------------------------
<S> <C> <C>
Feb 2.89 2.76
Mar 2.67 2.6
Apr 3.21 3
May 3.57 3.32
Jun 3.38 3.15
Jul 3.11 2.92
Aug 2.98 2.8
Sep 3.17 2.98
Oct 3.15 2.97
Nov 3.27 3.05
Dec 3.24 3.04
Jan 3.23 2.85
Feb 2.83 2.59
</TABLE>
[_] Nuveen California 30-Day Yield
[_] IBC Donoghue California Retail Tax-Exempt Money Market Fund Average
Past performance is not predictive of future performance.
4
<PAGE>
Nuveen Massachusetts Tax-Free Money Market Fund
Performance Overview
As of February 28, 1998
Fund Highlights
Inception Date 2/87
Net Assets ($000) $37,583
Average Weighted Maturity (days) 58.2
- ----------------------------------------------------------
Tax-Free Yields
SEC 7-Day Yield 2.75%
SEC 30-Day Yield 2.73%
- ----------------------------------------------------------
Taxable Equivalent Yields
SEC 7-Day Yield 4.53%
SEC 30-Day Yield 4.50%
- ----------------------------------------------------------
Based on a combined federal and state income tax rate of 39.3%; represents the
yield from a taxable investment necessary to equal the yield of the Nuveen fund
on an after-tax basis.
Top 5 Sectors
Tax Obligation (General) 28%
Education and Civic Organizations 26%
Health Care 22%
Housing (Multifamily) 7%
Long-Term Care 6%
- ----------------------------------------------------------
1997-1998 Index Comparison
[MOUNTAIN CHART APPEARS HERE]
<TABLE>
<CAPTION>
Nuveen Massachusetts 30-Day Yield IBC Donoghue Massachusetts Retail Tax-Exempt Money Market Fund Average
<S> <C> <C> <C> <C>
Feb. 1997 2.81 2.8
Mar. 1997 2.61 2.68
Apr. 1997 3.12 3.06
May. 1997 3.43 3.33
Jun. 1997 3.29 3.18
Jul. 1997 3.09 3.04
Aug. 1997 3.00 2.94
Sep. 1997 3.13 3.05
Oct. 1997 3.04 3.03
Nov. 1997 3.2 3.1
Dec. 1997 3.12 3.08
Jan. 1998 2.97 2.91
Feb. 1998 2.71 2.65
</TABLE>
[_] Nuveen Massachusetts 30-Day Yield
[_] IBC Donoghue Massachusetts Retail Tax-Exempt Money Market Fund Average
Past performance is not predictive of future performance.
5
<PAGE>
Nuveen New York Tax-Free Money Market Fund
Performance Overview
As of February 28, 1998
Fund Highlights
Inception Date 2/87
Net Assets ($000) $30,276
Average Weighted Maturity (days) 33.0
- ----------------------------------------------------------
Tax-Free Yields
SEC 7-Day Yield 2.84%
SEC 30-Day Yield 2.69%
- ----------------------------------------------------------
Taxable Equivalent Yields
SEC 7-Day Yield 4.42%
SEC 30-Day Yield 4.18%
- ----------------------------------------------------------
Based on a combined federal and state income tax rate of 35.7%; represents the
yield from a taxable investment necessary to equal the yield of the Nuveen fund
on an after-tax basis.
Top 5 Sectors
Tax Obligation (General) 20%
Education and Civic Organizations 19%
Health Care 10%
Tax Obligation (Limited) 10%
Consumer Cyclical 9%
- ----------------------------------------------------------
1997-1998 Index Comparison
[MOUNTAIN CHART APPEARS HERE]
1997-1998 Index Comparison
[MOUNTAIN CHART APPEARS HERE]
<TABLE>
<CAPTION>
Nuveen New York IBC Donoghue New York
30-Day Yield Retail Tax-Exempt
Money Market Fund Average
<S> <C> <C>
Feb. 1997 2.88 2.77
Mar. 1997 2.74 2.63
Apr. 1997 3.2 3.02
May. 1997 3.45 3.32
Jun. 1997 3.31 3.18
Jul. 1997 3.11 2.98
Aug. 1997 3.00 2.87
Sep. 1997 3.15 3.03
Oct. 1997 3.12 3.02
Nov. 1997 3.23 3.13
Dec. 1997 3.21 3.12
Jan. 1998 3.03 2.93
Feb. 1998 2.68 2.68
</TABLE>
[_] Nuveen New York 30-Day Yield
[_] IBC Donoghue New York Retail Tax-Exempt Money Market Fund Average
Past performance is not predictive of future performance.
6
<PAGE>
Portfolio of Investments
February 28, 1998
Reserves
<TABLE>
<CAPTION>
Principal Amortized
Amount Description Ratings* Cost
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Alabama -- 1.0%
$ 2,735,000 Marshall County Special Obligation School Refunding Warrants, Series 1994, A-1+ $2,735,000
Variable Rate Demand Bonds, 3.450%, 2/01/12+
- -----------------------------------------------------------------------------------------------------------------------------------
Arizona -- 5.6%
7,000,000 The Industrial Development Authority of the County of Apache (Arizona), VMIG-1 7,000,000
Pollution Control Revenue Bonds, 1981 Series B (Tucson Electric Power
Company Project), Variable Rate Demand Bonds, 3.750%, 10/01/21+
8,000,000 Mesa Municipal Development Corporation, Special Tax Bonds, Series 1985, VMIG-1 8,000,000
Commercial Paper, 3.200%, 4/09/98
- -----------------------------------------------------------------------------------------------------------------------------------
California -- 1.9%
5,000,000 California State Revenue Anticipation Notes, Series 1997, 4.500%, 6/30/98 MIG-1 5,010,434
- -----------------------------------------------------------------------------------------------------------------------------------
Colorado -- 1.8%
5,000,000 Fort Morgan Water Works and Distribution Enterprise, Water Revenue A-1+ 5,000,000
Bonds, Series 1997, Variable Rate Demand Bonds, 3.450%, 12/01/17+
- -----------------------------------------------------------------------------------------------------------------------------------
District of Columbia -- 3.0%
8,100,000 District of Columbia General Obligation, Series 1992A-2, Variable VMIG-1 8,100,000
Rate Demand Bonds, 3.700%, 10/01/07+
- -----------------------------------------------------------------------------------------------------------------------------------
Florida -- 6.9%
1,400,000 Florida Housing Finance Agency, Multi-Family Housing Revenue A-1 1,400,000
Refunding Bonds, 1989 Series E (Fairmont Oaks Project), Variable Rate
Demand Bonds, 3.650%, 4/01/26+
3,100,000 Pasco County Housing Finance Authority, Multi-Family Housing VMIG-1 3,100,000
Revenue Bonds (Carlton Arms of Magnolia Valley Project), Series 1985,
Variable Rate Demand Bonds, 3.225%, 12/01/07+
4,800,000 Sarasota County Public Hospital District, Sarasota Memorial A-1+ 4,800,000
Hospital Project, Series C, Commercial Paper, 3.400%, 5/14/98
Sunshine State Governmental Financing Commission, Commercial Paper:
3,300,000 3.750%, 3/06/98 VMIG-1 3,300,000
4,000,000 3.550%, 6/23/98 VMIG-1 4,000,000
2,200,000 Volusia County Health Facilities Authority, Health Facilities A-1+ 2,200,000
Revenue Bonds (The Alliance Community for Retirement Living,
Inc. Project), Series 1995, Variable Rate Demand Bonds,
3.800%, 9/01/20+
- -----------------------------------------------------------------------------------------------------------------------------------
Hawaii -- 0.7%
1,800,000 Department of Budget and Finance of the State of Hawaii, Special Purpose A-1 1,800,000
Demand Revenue Bonds (Adventist Health System--West),
Series 1984, Variable Rate Demand Bonds, 3.750%, 9/01/99+
- -----------------------------------------------------------------------------------------------------------------------------------
Illinois -- 15.2%
5,500,000 Illinois Health Facilities Authority, Revenue Bonds, Series 1997 VMIG-1 5,500,000
(Victory Health Services), Commercial Paper, 3.600%, 3/12/98
2,700,000 Illinois Health Facilities Authority, Rush Presbyterian Series 1989A, VMIG-1 2,700,000
Commercial Paper, 3.400%, 5/15/98
7,000,000 Illinois Development Finance Authority, Pollution Control Revenue Bonds P-1 7,000,000
(Diamond-Star Motors Corporation Project), Series 1995,
Variable Rate Demand Bonds, 3.750%, 12/01/08+
</TABLE>
7
<PAGE>
Portfolio of Investments
February 28, 1998
Reserves -- continued
<TABLE>
<CAPTION>
Principal Amortized
Amount Description Ratings* Cost
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Illinois -- continued
$ 2,000,000 Illinois Development Finance Authority, Revenue Bonds, Radiological Society of A-1+ $2,000,000
North America, Series 1997, Variable Rate Demand Bonds, 3.550%, 6/01/17
6,000,000 Illinois Educational Facilities Authority, Adjustable Demand Revenue Bonds, VMIG-1 6,000,000
Shedd Aquarium Society, Series 1987B, Commercial Paper, 3.850%, 7/23/98
3,000,000 City of Chicago, General Obligation Tender Notes, Series 1997, 3.550%, 10/29/98 MIG-1 3,000,000
5,000,000 City of Chicago, General Obligation Tender Notes, Series 1998, 3.550%, 2/04/99 SP-1+ 5,000,000
2,500,000 City of Chicago, Chicago-OOHare International Airport, Special Facility Revenue P-1 2,500,000
Bonds (American Airlines, Inc. Project), Series 1983A, Variable Rate Demand
Bonds, 3.650%, 12/01/17
5,700,000 City of Decatur, Macon County, Illinois, Unit Priced Demand Adjustable Water VMIG-1 5,700,000
Revenue Bonds, Series 1985, Commercial Paper, 4.100%, 3/12/98
1,770,000 Village of Oak Park, Illinois, Variable Rate Demand Revenue Bonds (Lone Tree N/R 1,770,000
Area Girl Scout Council, Inc. Project), Series 1997, 3.600%, 11/01/17
- ---------------------------------------------------------------------------------------------------------------------------
Iowa -- 3.0%
5,000,000 Iowa School Cash Anticipation Program, Iowa School Corporations, Warrant MIG-1 5,010,799
Certificates, 1997-98 Series A Notes, 4.500%, 6/26/98
2,900,000 City of Eddyville, Iowa, Industrial Development Revenue Bonds (Heartland Lysine, N/R 2,900,000
Inc. Project), Series 1985, Variable Rate Demand Bonds, 3.650%, 11/01/03
- ---------------------------------------------------------------------------------------------------------------------------
Kentucky -- 3.3%
9,005,000 Hancock County, Kentucky, Industrial Building Revenue Refunding Bonds (Southwire N/R 9,005,000
Company Project), Series 1990, Variable Rate Demand Bonds, 3.600%, 7/01/10
- ---------------------------------------------------------------------------------------------------------------------------
Louisiana -- 1.5%
4,000,000 Ascension Parish Pollution Control (BASF Wyandotte Corporation), Variable Rate P-1 4,000,000
Demand Bonds, 3.650%, 12/01/05
- ---------------------------------------------------------------------------------------------------------------------------
Massachusetts -- 0.9%
2,400,000 Newton Bond Anticipation Notes, 4.000%, 3/25/98 N/R 2,400,130
- ---------------------------------------------------------------------------------------------------------------------------
Michigan -- 4.7%
7,100,000 Michigan Job Development Authority, Limited Obligation Revenue Bonds (Frankenmuth A-1 7,100,000
Bavarian Inn Motor Lodge Project), Series A, Variable Rate Demand Bonds,
3.875%, 9/01/15
5,000,000 The School District of the City of Kalamazoo, County of Kalamazoo, State of SP-1+ 5,001,803
Michigan, 1997 State Aid Notes (Limited Tax General Obligation), 4.000%, 4/15/98
735,000 The Economic Development Corporation of the City of Warren, Macomb County, P-1 735,000
Michigan, Floating Rate Limited Obligation Revenue Bonds (The Prince Company, Inc.,
Michigan Division Project), Series A, Variable Rate Demand Bonds, 3.600%, 11/01/99
- ---------------------------------------------------------------------------------------------------------------------------
Minnesota -- 1.9%
5,125,000 City of Bloomington, Minnesota, Floating Rate Demand Bonds, Commercial Revenue A-1+ 5,125,000
Bonds (James Avenue Associates Project), Series 1985, Variable Rate Demand
Bonds, 3.450%, 12/01/15
- ---------------------------------------------------------------------------------------------------------------------------
Missouri -- 4.5%
3,000,000 Health and Educational Facilities Authority of the State of Missouri, Health VMIG-1 3,000,000
Facilities Revenue Bonds (Bethesda Barclay), Series 1996A, Variable Rate
Demand Bonds, 3.950%, 8/15/26
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Principal Amortized
Amount Description Ratings* Cost
- ------------------------------------------------------------------------------------------------------------------------
Missouri -- continued
<S> <C> <C> <C>
$ 9,200,000 State Environmental Improvement and Energy Resources Authority of the State of VMIG-1 $ 9,200,000
Missouri, Unit Priced Demand Adjustable Pollution Control Revenue Bonds, Series
1985 A (Union Electric Company), Commercial Paper, 3.200%, 4/08/98
- ------------------------------------------------------------------------------------------------------------------------
New Hampshire -- 2.5%
6,900,000 New Hampshire Higher Educational and Health Facilities Authority, Revenue Bonds, A-1 6,900,000
Hunt Community Issue, Series 1996, Variable Rate Demand Bonds, 3.500%, 5/01/26+
- ------------------------------------------------------------------------------------------------------------------------
North Carolina -- 3.7%
4,650,000 North Carolina Municipal Power Agency, Catawba Electric Revenue, Commercial A-1+ 4,650,000
Paper, Series A, 3.250%, 3/20/98
2,400,000 The Wake County Industrial Facilities and Pollution Control Financing Authority, VMIG-1 2,400,000
Pollution Control Revenue Refunding Bonds, Carolina Power and Light Company
Project, Series 1990B, Variable Rate Demand Bonds, 3.500%, 6/15/14+
3,000,000 The Wake County Industrial Facilities and Pollution Control Financing Authority, A-2 3,000,000
Pollution Control Refunding Bonds (Carolina Power and Light Company Project),
Series 1985C, Commercial Paper, 4.250%, 3/06/98
- ------------------------------------------------------------------------------------------------------------------------
Ohio -- 12.2%
2,555,000 Ohio School Districts, 1998 Cash Flow Borrowing Program, Certificates of MIG-1 2,566,853
Participation, Series A, Tax Anticipation Notes, 4.120%, 12/31/98
8,300,000 Centerville Health Care, Health Care Revenue Bonds (Bethany Lutheran Village VMIG-1 8,300,000
Continuing Care Facilities Expansion Project), Variable Rate Demand Bonds,
3.500%, 5/01/08+
3,600,000 Cuyahoga County, University Hospital of Cleveland, Series 1985, Variable Rate VMIG-1 3,600,000
Demand Bonds, 3.850%, 1/01/16+
3,000,000 Cuyahoga County Hospital, Revenue Refunding Bonds, Cleveland Clinic, Series VMIG-1 3,000,000
1998A, Variable Rate Demand Bonds, 3.400%, 1/01/24+
5,120,000 County of Erie, Ohio, Adjustable Rate Demand Bonds, Health Care Facilities VMIG-1 5,120,000
Revenue Bonds (The Commons of Providence Project), Series 1996 B,
Variable Rate Demand Bonds, 3.560%, 10/01/21+
3,570,000 County of Franklin, Ohio, Floating Rate Demand Bonds, Hospital Financing Revenue N/R 3,570,000
Bonds, Series 1993 (Traditions at Mill Run Project), Variable Rate Demand Bonds,
3.570%, 11/01/14+
5,000,000 County of Lucas, Ohio, Multi-Mode Variable Rate Demand Facilities Improvement VMIG-1 5,000,000
Revenue Bonds, Series 1997 (The Toledo Zoological Society Project), Variable
Rate Demand Bonds, 3.450%, 10/01/05+
1,800,000 County of Ottawa, Ohio, Hospital Facilities, Variable Rate Demand Revenue Bonds, N/R 1,800,000
Series 1997 (Luther Home of Mercy Project), 3.450%, 10/01/17+
- ------------------------------------------------------------------------------------------------------------------------
Pennsylvania -- 5.3%
2,250,000 Butler County Industrial Development Authority (Pennsylvania), Industrial N/R 2,250,000
Development Revenue Bonds (Wise Business Forms, Incorporated Project),
Variable Rate Demand Bonds, Series 1997, 3.510%, 8/01/18+
7,000,000 Dauphin County General Authority (Pennsylvania), Variable Rate Demand Revenue A-1+ 7,000,000
Bonds (All Health Pooled Financing Program), Series A of 1997, 3.450%, 10/01/27+
1,000,000 City of Philadelphia Tax and Revenue Anticipation Notes, Series A of 1997-1998,
4.500%, 6/30/98 MIG-1 1,001,593
4,000,000 City of Philadelphia, Pennsylvania, General Obligation Bonds, Series 1990,
Commercial Paper, 4.100%, 3/12/98 VMIG-2 4,000,000
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Portfolio of Investments
February 28, 1998
Reserves -- continued
Principal Amortized
Amount Description Ratings* Cost
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Tennessee -- 2.4%
$3,500,000 The Industrial Development Board of the County of Jackson, Tennessee, Variable N/R $3,500,000
Rate Industrial Development Demand Revenue Bonds (Esselte Project), Series
1985B, Variable Rate Demand Bonds, 3.750%, 8/01/15+
3,100,000 The Industrial Development Board of the Metropolitan Government of Nashville N/R 3,100,000
and Davidson County (State of Tennessee), Multifamily Housing Revenue
Refunding Bonds (Hickory Trace Apartments Project), Series 1995, Variable
Rate Demand Bonds, 3.450%, 6/01/15+
- ---------------------------------------------------------------------------------------------------------------------------
Texas -- 7.2%
4,000,000 Texas State Tax and Revenue Anticipation Notes, Series 1997A, 4.750%, 8/31/98 MIG-1 4,022,282
7,000,000 Austin (Travis and Williamson Counties), Series A, Austin Combined Utilities, A-1+ 7,000,000
Commercial Paper, 3.000%, 3/11/98
8,500,000 Brownsville Utility System, Commercial Paper, Series A, 3.450%, 5/08/98 A-1+ 8,500,000
- ---------------------------------------------------------------------------------------------------------------------------
Utah -- 1.3%
3,550,000 West Valley City Industrial Development (Johnson Matthey Project), Variable N/R 3,550,000
Rate Demand Bonds, 3.750%, 12/01/11+
- ---------------------------------------------------------------------------------------------------------------------------
Virginia -- 3.3%
3,000,000 Industrial Development Authority of Albemarle County, Virginia, Health A-1 3,000,000
Services Revenue Bonds (The University of Virginia Health Services
Foundation), Series 1996, Variable Rate Demand Bonds, 3.400%, 2/01/26+
2,600,000 The Industrial Development Authority of the City of Norfolk, Floating Rate N/R 2,600,000
Industrial Development Revenue Bonds (Norfolk-Virginia Beach-Portsmouth
MSA Limited Partnership Project), Variable Rate Demand Bonds, 5.525%, 11/01/04+
3,300,000 The Industrial Development Authority of the City of Richmond, Floating N/R 3,300,000
Rate Industrial Development Revenue Bonds (Richmond MSA Limited Partnership
Project), Variable Rate Demand Bonds, 5.525%, 11/01/04+
- ---------------------------------------------------------------------------------------------------------------------------
Washington -- 3.4%
4,900,000 Washington Health Care Facilities Authority, Series 1984 (Adventist A-1 4,900,000
Health System--West/Walla Walla General Hospital), Variable Rate
Demand Bonds, 3.750%, 9/01/09+
4,250,000 Spokane County, Washington, Road Fund, Tax Anticipation Notes, Series SP-1+ 4,256,095
1997, 4.250%, 6/30/98
- ---------------------------------------------------------------------------------------------------------------------------
Wisconsin -- 2.2%
6,000,000 Wisconsin Health and Educational Facilities Authority, Alexian Village VMIG-1 6,000,000
of Milwaukee, Inc. Refinancing, Series 1988A, Variable Rate Demand Bonds,
3.950%, 3/01/17+
- ---------------------------------------------------------------------------------------------------------------------------
$268,915,000 Total Investments -- 99.4% 268,979,989
============---------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- 0.6% 1,742,848
----------------------------------------------------------------------------------------------------------
Net Assets -- 100% $270,722,837
==========================================================================================================
</TABLE>
* Ratings (not covered by the report of independent public
accountants): Using the higher of Standard & Poor's or
Moody's rating.
N/R -- Investment is not rated.
+ The security has a maturity of more than one year, but
has variable rate and demand features which qualify it
as a short-term security. The rate disclosed is that
currently in effect. This rate changes periodically
based on market conditions or a specified market index.
See accompanying notes to financial statements.
10
<PAGE>
<TABLE>
<CAPTION>
Portfolio of Investments
February 28, 1998
California
Principal Amortized
Amount Description Ratings* Cost
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Consumer Staples - 4.4%
$7,000,000 San Dimas Industrial Development Bonds (Bausch & Lomb N/R $7,000,000
Incorporated), Variable Rate Demand Bonds, 3.700%, 12/01/15+
- ----------------------------------------------------------------------------------------------------------------
Health Care - 14.1%
5,100,000 California Health Facilities Financing Authority, Insured VMIG-1 5,100,000
Revenue Bonds (Sutter/CHS), 3.650%, 7/01/22+
1,575,000 California Health Facilities Financing Authority, Refunding VMIG-1 1,575,000
Revenue Bonds (St. Joseph Health System), Series 1985B,
Variable Rate Demand Bonds, 3.650%, 7/01/13+
4,300,000 California Health Facilities Authority (St. Joseph Health VMIG-1 4,300,000
System), Series 1991B, Variable Rate Demand Bonds,
3.650%, 7/01/09+
3,700,000 California Statewide Community Development Authority, Certificates VMIG-1 3,700,000
of Participation (Sutter Health Obligation Group), Variable Rate
Demand Bonds, 3.850%, 7/01/15+
5,000,000 Torrance Hospital Revenue (Little Company of Mary Hospital A-1 5,000,000
- Torrance Memorial Hospital), Variable Rate Demand Bonds,
3.250%, 2/01/22+
3,000,000 Washington Township Hospital District, 1984 Issue A, VMIG-1 3,000,000
Variable Rate Demand Bonds, 3.700%, 1/01/16+
- ----------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 14.7%
2,910,000 Chico Multifamily Housing (Sycamore Glen Project), Series N/R 2,910,000
1995, Variable Rate Demand Bonds, 3.480%, 4/07/14+
3,000,000 Hayward Housing Authority, Multifamily Mortgage Revenue A-2 3,000,000
Refunding, Series 1993A [Huntwood Terrace), Variable Rate
Demand Bonds, 4.000%, 3/01/27+
4,796,000 City of Los Angeles (Studio Colony Project), Variable Rate VMIG-1 4,796,000
Demand Bonds, Multifamily Housing Revenue Bonds,
3.700%, 5/01/07+
7,900,000 Orange County Apartment Development (Monarch Bay Apartments A-1 7,900,000
Project), Variable Rate Demand Bonds, 3.500%, 10/01/07+
3,800,000 Orange County (Robinson Ranch Apartments Project), Variable VMIG-1 3,800,000
Rate Demand Revenue Bonds, 3.200%, 11/01/08+
1,150,000 San Bernardino Multifamily Housing (Castle Park Apartments), VMIG-1 1,150,000
Variable Rate Demand Bonds, 3.750%, 11/01/05+
- ---------------------------------------------------------------------------------------------------------------
Other Revenue - 3.1%
5,000,000 California State Revenue Anticipation Notes, Series 1997, MIG-1 5,010,434
4.500%, 6/30/98
- ---------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 11.9%
5,000,000 California School Cash Reserve Program Authority, 1997 MIG-1 5,014,591
Pool Bonds, Series A, 4.750%, 7/02/98
2,000,000 Irvine Ranch Water District, Variable Rate Demand Bonds, VMIG-1 2,000,000
3.550%, 6/01/15+
2,000,000 Riverside County School Financing Authority, 1997-98 MIG-1 2,009,884
Revenue Anticipation Notes, School Districts
Financing Program, 4.500%, 10/01/98
3,000,000 San Diego County Teeter Obligation, Tax-Exempt Commercial P-1 3,000,000
Paper, Series B, 3.500%, 3/11/98
2,000,000 County of San Mateo, California, 1997-98 Tax and Revenue SP-1+ 2,004,506
Anticipation Notes, 4.500%, 7/01/98
5,000,000 South Coast Local Education Agencies, Pooled Tax and SP-1+ 5,011,169
Revenue Anticipation Notes Program,
Series 1997A, 4.500%, 6/30/98
</TABLE>
11
<PAGE>
Portfolio of Investments
February 28, 1998
California -- continued
<TABLE>
<CAPTION>
Principal Amortized
Amount Description Ratings* Cost
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Tax Obligation/Limited -- 24.9%
$ 9,000,000 Kern Community College District, Certificates of Participation, Series A-2 $ 9,000,000
1995, Variable Rate Demand Bonds, 4.150%, 1/01/25**
5,000,000 Los Angeles County Metro Transport Authority, Second Subordinate Sales A-1 5,000,000
Tax Revenue, Commercial Paper, 3.550%, 5/19/98
1,900,000 Oakland, California, Certificates of Participation, Capital N/R 1,900,000
Improvement Project, Variable Rate Demand Bonds, 3.500%, 12/01/15**
7,000,000 Orange County, Irvine Coast Assessment District #88-1, Variable Rate VMIG-1 7,000,000
Demand Bonds, 3.600%, 9/02/18**
3,000,000 County of Riverside Teeter Obligation, Tax-Exempt Commercial Paper, A-1+ 3,000,000
Series B, 3.700%, 3/12/98
5,000,000 San Joaquin County Transportation Authority, Sales Tax Revenue A-1+ 5,000,000
Commercial Paper, 3.400%, 6/05/98
6,000,000 Santa Clara County Transit District, Refunding Equipment Trust VMIG-1 6,000,000
Certificates, Variable Rate Demand Bonds, 4.050%, 6/01/15**
3,000,000 Westminster Redevelopment Agency, Westminster Commercial Redevelopment A-1+ 3,000,000
Project No. 1, 1997 Tax Allocation Revenue Refunding Bonds,
Variable Rate Demand Bonds (Orange County, California), 3.200%,
8/01/27**
- --------------------------------------------------------------------------------------------------------------------
Utilities -- 7.1%
1,000,000 California Pollution Control Financing Authority, Pacific Gas & A-1+ 1,000,000
Electric, Series 1996D, Commercial Paper, 3.200%, 5/08/98
5,400,000 California Pollution Control Financing Authority, Pollution A-1+ 5,400,000
Control Refunding Revenue Bonds (Pacific Gas and Electric Company),
1996 Series C, Variable Rate Demand Bonds, 3.550%, 11/01/26**
5,000,000 Sacramento Municipal Utility District, Series I, Commercial Paper, A-1+ 5,000,000
3.000%, 3/27/98
- --------------------------------------------------------------------------------------------------------------------
Water and Sewer -- 19.1%
4,675,000 Hillsborough Certificates of Participation, Water & Sewer System Project, A-1 4,675,000
Series 1995A, Variable Rate Demand Bonds, 3.350%, 6/01/15**
2,500,000 Los Angeles Wastewater System, Commercial Paper, 3.150%, 5/20/98 VMIG-1 2,500,000
7,400,000 Monterey County Financing Authority, Revenue Bonds (Reclamation and VMIG-1 7,400,000
Distribution Project), Series 1995A, Variable Rate Demand Bonds,
3.900%, 9/01/36**
6,300,000 Orange County Sanitation District, Certificates of Participation, VMIG-1 6,300,000
Variable Rate Demand Bonds, 3.600%, 8/01/17**
4,050,000 San Diego County, Rincon Del Diablo Municipal Water District, Rincon VMIG-2 4,050,000
Public Facilities Corporation, Commercial Paper, 3.900%, 5/01/98
5,800,000 Santa Paula Public Financing Authority, Lease Revenue Bonds, Series A-2 5,800,000
1996, Water System Acquisition Project, Variable Rate Demand Bonds,
3.800%, 2/01/26**
- --------------------------------------------------------------------------------------------------------------------
$159,256,000 Total Investments -- 99.3% 159,306,584
================----------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- 0.7% 1,188,858
------------------------------------------------------------------------------------------------
Net Assets -- 100% $160,495,442
================================================================================================
* Ratings (not covered by the report of independent public accountants): Using the higher of
Standard & Poor's or Moody's rating.
N/R -- Investment is not rated.
** The security has a maturity of more than one year, but has variable rate and demand features
which qualify it as a short-term security. The rate disclosed is that currently in effect.
This rate changes periodically based on market conditions or a specified market index.
See accompanying notes to financial statements.
</TABLE>
12
<PAGE>
Portfolio of Investments
February 28, 1998
Massachusetts
<TABLE>
<CAPTION>
Principal Amortized
Amount Description Ratings* Cost
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Education and Civic Organizations -- 24.7%
$ 800,000 Massachusetts Health and Educational Facilities Authority (Harvard VMIG-1 $ 800,000
University), Variable Rate Demand Bonds, 2.950%, 2/01/16**
1,700,000 Massachusetts Health and Educational Facilities Authority, Amherst College VMIG-1 1,700,000
Issue, Series F, Variable Rate Demand Bonds, 3.100%, 11/01/26**
1,000,000 Massachusetts Industrial Finance Agency (Showa Women's Institute Boston, VMIG-1 1,000,000
Inc. 1994 Project), Variable Rate Demand Bonds, 3.650%, 3/15/04**
1,000,000 Massachusetts Industrial Finance Agency (Emerson College Issue), Series N/R 1,000,000
1995, Variable Rate Demand Bonds, 3.200%, 1/01/15**
1,000,000 Massachusetts Industrial Finance Agency (Massachusetts Society for the A-1 1,000,000
Prevention of Cruelty to Animals Issue), Series 1997, Variable Rate
Demand Bonds, 3.250%, 8/01/27**
1,000,000 Massachusetts Industrial Finance Agency (Gordon College Issue), Series A-1+ 1,000,000
1997, Variable Rate Demand Bonds, 3.250%, 12/01/27**
1,000,000 Massachusetts Industrial Finance Agency (Eastern Nazarene College Issue), A-1+ 1,000,000
Series 1997, Variable Rate Demand Bonds, 3.250%, 10/01/27**
1,800,000 Puerto Rico Industrial Medical, Educational and Environmental Authority VMIG-1 1,800,000
(Inter American University of Puerto Rico), Commercial Paper, 3.650%,
4/06/98
- --------------------------------------------------------------------------------------------------------------------
Health Care -- 21.5%
1,000,000 Massachusetts Health and Educational Facilities Authority, Capital Asset VMIG-1 1,000,000
Program, Series A, Variable Rate Demand Bonds, 3.300%, 1/01/01**
1,000,000 Massachusetts Health and Educational Facilities Authority (Capital Asset VMIG-1 1,000,000
Program, Series B), Variable Rate Demand Bonds, 3.400%, 7/01/05**
1,700,000 Massachusetts Health and Educational Facilities Authority (Capital Asset VMIG-1 1,700,000
Program), Variable Rate Demand Bonds, 3.600%, 1/01/35**
1,800,000 Massachusetts Health and Educational Facilities Authority (Brigham and VMIG-1 1,800,000
Women's Hospital), Variable Rate Demand Bonds, 3.300%, 7/01/17**
1,900,000 Massachusetts Health and Educational Facilities Authority, Partners VMIG-1 1,900,000
Healthcare System, Series P, Variable Rate Demand Bonds, 3.100%,
7/01/27**
675,000 Massachusetts Health and Educational Facilities Authority, Hallmark Health Aaa 675,997
System Issue, Revenue Bonds, Series A, Variable Rate Demand Bonds,
4.250%, 7/01/98
- --------------------------------------------------------------------------------------------------------------------
Housing/Multifamily -- 6.8%
1,560,000 Massachusetts Industrial Finance Agency, Chestnut House Apartments A-2 1,560,000
(FHA Insurance), Variable Rate Demand Bonds, 3.300%, 8/01/26**
1,000,000 Massachusetts Industrial Finance Agency (Lower Mills Associates LP), N/R 1,000,000
Series 1995, Variable Rate Demand Bonds, 3.200%, 12/01/20**
- --------------------------------------------------------------------------------------------------------------------
Industrial/Other -- 1.6%
585,000 Massachusetts Industrial Finance Agency, Adjustable Rate Industrial Revenue N/R 585,000
Bonds (Jencoat/Levy Realty Trust), Variable Rate Demand Bonds, 4.415%,
10/06/99**
- --------------------------------------------------------------------------------------------------------------------
Long Term Care -- 5.3%
1,300,000 Massachusetts Industrial Finance Agency, Revenue Bonds (Goddard House), A-1 1,300,000
Series 1995, Variable Rate Demand Bonds, 3.150%, 11/01/25**
</TABLE>
13
<PAGE>
Portfolio of Investments
February 28, 1998
Massachusetts -- continued
<TABLE>
<CAPTION>
Principal Amortized
Amount Description Ratings* Cost
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Long Term Care -- continued
$ 680,000 Massachusetts Industrial Finance Agency, Edgewood Retirement Community Project, VMIG-1 $ 680,000
Series 1995-C, Variable Rate Demand Bonds, 3.300%, 11/15/25+
- ---------------------------------------------------------------------------------------------------------------------------------
Other Revenue -- 2.7%
1,000,000 Montachusett Regional Transit Authority, Massachusetts, Revenue Anticipation Notes, N/R 1,001,065
4.250%, 6/26/98
- ---------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General -- 27.3%
1,800,000 Massachusetts Bay Transportation Authority, Series C, Commercial Paper, 3.550%, 4/29/98 A-1+ 1,800,000
1,000,000 Town of Barnstable, Massachusetts, Bond Anticipation Notes, 4.250%, 10/23/98 N/R 1,002,489
1,000,000 Farmingham General Obligation, Unlimited Tax Bond Anticipation Note, 4.000%, 2/05/99 N/R 1,003,335
1,000,000 Town of Georgetown, Massachusetts, Bond Anticipation Notes, 4.000%, 6/12/98 N/R 1,000,542
1,500,000 Town of Holliston, Massachusetts, Bond Anticipation Notes, 4.000%, 9/23/98 N/R 1,502,912
1,000,000 Newton Bond Anticipation Notes, 4.000%, 3/25/98 N/R 1,000,127
1,000,000 City of Quincy, Massachusetts, Bond Anticipation Notes, 4.200%, 5/21/98 N/R 1,000,680
1,000,000 Town of Uxbridge, Massachusetts, Bond Anticipation Notes, 4.250%, 7/15/98 N/R 1,001,433
1,000,000 Town of Weston, Massachusetts, Bond Anticipation Notes, 4.000%, 9/30/98 N/R 1,001,694
- ---------------------------------------------------------------------------------------------------------------------------------
Utilities -- 1.6%
600,000 Massachusetts Industrial Finance Agency, Resource Recovery (Ogden Haverhill), VMIG-1 600,000
Variable Rate Demand Bonds, 3.150%, 12/01/06+
- ---------------------------------------------------------------------------------------------------------------------------------
Water and Sewer -- 5.1%
1,000,000 Massachusetts Water Resources Authority, Series 1997, Commercial Paper, 3.600%, 5/13/98 A-1+ 1,000,000
900,000 Massachusetts Water Resources Authority, Series 1994, Commercial Paper, 3.650%, 5/13/98 A-1+ 900,000
- ---------------------------------------------------------------------------------------------------------------------------------
$36,300,000 Total Investments -- 96.6% 36,315,274
===========----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- 3.4% 1,268,024
-----------------------------------------------------------------------------------------------------------------
Net Assets -- 100% $37,583,298
=================================================================================================================
</TABLE>
* Ratings (not covered by the report of independent public
accountants): Using the higher of Standard & Poor's or
Moody's rating.
N/R - Investment is not rated.
+ The security has a maturity of more than one year, but has
variable rate and demand features which qualify it as a
short-term security. The rate disclosed is that currently
in effect. This rate changes periodically based on market
conditions or a specified market index.
See accompanying notes to financial statements.
14
<PAGE>
<TABLE>
<CAPTION>
Portfolio of Investments
February 28, 1998
New York
Principal Amortized
Amount Description Ratings* Cost
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Consumer Cyclical - 8.6%
$1,100,000 New York Environmental Facilities Corporation (General Electric Company), A-1+ $1,100,000
Commercial Paper, 3.550%, 3/09/98
1,000,000 Dutchess County Industrial Development Agency, Industrial Development A-1 1,000,000
Revenue Bonds (Toys "R" US--NYTEX Inc. Facility), Series 1984, Variable
Rate Demand Bonds, 3.475%, 11/01/19+
500,000 Yonkers Industrial Development Agency, Series 1989, Civic Facility Revenue VMIG-1 500,000
Bonds, Variable Rate Demand Bonds, 3.200%, 7/01/19+
- ----------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations - 18.4%
1,300,000 Dormitory Authority of the State of New York, New York Founding Charitable VMIG-1 1,300,000
Corporation, Revenue Bonds, Series 1997, Variable Rate Demand Bonds,
3.300%, 7/01/12+
1,100,000 New York State Housing Finance Agency, Demand Revenue Bonds, Series 1984-A VMIG-1 1,100,000
(Mt. Sinai School of Medicine), Variable Rate Demand Bonds, 3.250%,
11/01/14+
1,100,000 New York City Trust for Cultural Resources (Guggenheim Foundation), Variable VMIG-1 1,100,000
Rate Demand Bonds, 3.650%, 12/01/15+
200,000 New York City Industrial Development Agency, Revenue Bonds, Series 1989, A-1+ 200,000
Audubon Society, Variable Rate Demand Bonds, 3.650%, 12/01/14+
900,000 Puerto Rico Industrial Medical Education and Environmental Authority, A-1 900,000
Ana G. Mendez Educational Foundation (FEAGM Project), Variable Rate Demand
Bonds, 4.100%, 12/01/15+
980,000 Syracuse Industrial Development Agency, Multi-Modal Interchangeable Rate Civic VMIG-1 980,000
Facility, Revenue Bonds (Syracuse University), Variable Rate Demand Bonds,
3.650%, 3/01/23+
- ----------------------------------------------------------------------------------------------------------------------
Financials - 6.6%
1,000,000 City of Albany Industrial Development Agency, Industrial Development Revenue A-1 1,000,000
Bonds (Vulcan Investors 1986-1 Project), Series 1986 A, Variable Rate Demand
Bonds, 4.100%, 7/01/06 (Mandatory put 7/01/98)+
1,000,000 New York City Industrial Development Agency, Refunding Revenue (LaGuardia A-1+ 1,000,000
Associates Project), Variable Rate Demand Bonds, 3.300%, 12/01/15+
- ----------------------------------------------------------------------------------------------------------------------
Health Care - 9.6%
900,000 Dormitory Authority of the State of New York (Sloan Kettering Cancer Center), A-1 900,000
Variable Rate Demand Bonds, 3.300%, 7/01/19+
900,000 New York State Medical Care Facilities Finance Agency (Lenox Hill Hospital), VMIG-1 900,000
Variable Rate Demand Bonds, 3.300%, 11/01/08+
1,100,000 New York State Medical Care Facilities Finance Agency (Children's Hospital
of Buffalo), Variable Rate Demand Bonds, 3.400%, 11/01/05+ VMIG-1 1,100,000
- ----------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 5.5%
1,000,000 New York State Housing Finance Agency (Normandie Court), Variable Rate
Demand Bonds, 3.150%, 5/15/15+ VMIG-1 1,000,000
370,000 New York City Housing Development Corporation (Parkgate Tower), Variable
Rate Demand Bonds, 3.200%, 12/01/07+ A-1+ 370,000
300,000 New York City Housing Development Corporation (Columbus Gardens Project),
Variable Rate Demand Bonds, 3.200%, 2/01/07+ A-1+ 300,000
</TABLE>
15
<PAGE>
Portfolio of Investments
February 28, 1998
New York - continued
<TABLE>
<CAPTION>
Principal Amortized
Amount Description Ratings* Cost
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Industrial/Other - 5.6%
$ 700,000 Guilderland Industrial Development Agency, Series 1993A (Northeastern P-1 $ 700,000
Ind Park PJ), Variable Rate Demand Bonds, 3.550%, 12/01/08+
1,000,000 Nassau County Industrial Development Agency, Manhasset Associates A-1 1,000,000
Project, Series 1984, Variable Rate Demand Bonds, 3.100%, 12/01/99+
- ----------------------------------------------------------------------------------------------------------------------
Long Term Care - 6.3%
1,100,000 New York State Dormitory Authority (St. Francis Center at the Knolls, VMIG-1 1,100,000
Inc.), Variable Rate Demand Bonds, 3.750%, 7/01/23+
800,000 New York State Dormitory Authority, Revenue Bonds, Series 1995 VMIG-1 800,000
(Beverwyck Inc), Variable Rate Demand Bonds, 3.300%, 7/01/25+
- ----------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 19.0%
1,000,000 New York State Environmental Quality, Variable Interest Rate General VMIG-1 1,000,000
Obligation Bonds, Series 1997A, 3.450%, 2/01/17+
1,000,000 Buffalo Revenue Anticipation Notes, 4.400%, 8/05/98 MIG-1 1,002,435
1,000,000 County of Erie, New York, General Obligation Serial Notes, 1997B, N/R 1,004,341
4.500%, 10/29/98
1,000,000 New York City General Obligation Adjustable Rate Bonds, Fiscal 1994, VMIG-1 1,000,000
Series B-4, Variable Rate Demand Bonds, 3.900%, 8/15/21+
500,000 The City of New York, General Obligation Bonds, Fiscal 1995, Series B, VMIG-1 500,000
Variable Rate Demand Bonds, 3.600%, 8/15/22+
1,250,000 Puerto Rico Government Development Bank, Adjustable Refunding Bonds, VMIG-1 1,250,000
Series 1985, Variable Rate Demand Bonds, 2.900%, 12/01/15+
- ----------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 9.4%
1,200,000 New York Local Government Assistance Corp, Series 1995E, Variable Rate VMIG-1 1,200,000
Demand Bonds, 3.150%, 4/01/25+
640,000 New York State Job Development Authority, Series 1984E, Variable Rate VMIG-1 640,000
Demand Bonds, 4.100%, 3/01/99+
1,000,000 Triborough Bridge and Tunnel Authority, Special Obligation, Series 1994, MIG-1 1,000,000
Variable Rate Demand Bonds, 3.150%, 1/01/24+
- ----------------------------------------------------------------------------------------------------------------------
Transportation - 1.3%
400,000 New York State Thruway Authority, General Revenue Bonds, Variable Rate VMIG-1 400,000
Demand Bonds, 3.650%, 1/01/24+
- ----------------------------------------------------------------------------------------------------------------------
Utilities - 3.3%
1,000,000 New York State Energy Research and Development Authority, Pollution P-1 1,000,000
Control Revenue (Central Hudson Gas and Electric Corporation),
Variable Rate Demand Bonds, 3.200%, 11/01/20+
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Principal Amortized
Amount Description Ratings* Cost
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Water and Sewer - 3.3%
$1,000,000 New York City Municipal Water Finance Authority, Series 3, A-1+ $ 1,000,000
Commercial Paper, 3.300%, 3/09/98
- -------------------------------------------------------------------------------------------------------------------
$29,340,000 Total Investments - 96.9%, 29,346,776
===========--------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 3.1% 929,527
--------------------------------------------------------------------------------------------------
Net Assets - 100% $30,276,303
==================================================================================================
</TABLE>
* Ratings (not covered by the report of independent public
accountants): Using the higher of Standard & Poor's or
Moody's rating.
N/R - Investment is not rated.
+ The security has a maturity of more than one year, but
has variable rate and demand features which qualify it as
a short-term security. The rate disclosed is that
currently in effect. This rate changes periodically based
on market conditions or a specified market index.
17
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
Statement of Net Assets
February 28, 1998
Reserves California
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Investments in short-term municipal securities, at amortized
cost, which approximates market value (note 1) $268,979,989 $159,306,584
Cash 1,108,739 652,281
Receivables:
Interest 1,507,742 983,936
Investments sold -- --
Other assets 4,293 8,319
- ---------------------------------------------------------------------------------------------
Total assets 271,600,763 160,951,120
- ---------------------------------------------------------------------------------------------
Liabilities
Accrued expenses:
Management fees (note 4) 94,638 45,277
12b-1 fees (note 4) 17,667 34,497
Other 196,852 17,036
Dividends payable 568,769 358,868
- ---------------------------------------------------------------------------------------------
Total liabilities 877,926 455,678
- ---------------------------------------------------------------------------------------------
Net assets applicable to shares outstanding (note 3) $270,722,837 $160,495,442
=============================================================================================
Shares outstanding:
Service Plan series -- 86,915,597
Distribution Plan series -- 54,788,953
Institutional series -- 18,790,892
- ---------------------------------------------------------------------------------------------
Total shares outstanding 270,722,837 160,495,442
=============================================================================================
Net asset value, offering and redemption price per share
(net assets divided by shares outstanding) $ 1.00 $ 1.00
=============================================================================================
</TABLE>
18
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
Massachusetts New York
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Investments in short-term municipal securities, at amortized
cost, which approximates market value (note 1) $36,315,274 $29,346,776
Cash 1,068,064 795,044
Receivables:
Interest 303,309 147,831
Investments sold 100,000 120,364
Other assets 978 499
- --------------------------------------------------------------------------------------------
Total assets 37,787,625 30,410,514
- --------------------------------------------------------------------------------------------
Liabilities
Accrued expenses:
Management fees (note 4) 1,935 3,226
12b-1 fees (note 4) 21,303 2,682
Other 99,353 63,601
Dividends payable 81,736 64,702
- --------------------------------------------------------------------------------------------
Total liabilities 204,327 134,211
- --------------------------------------------------------------------------------------------
Net assets applicable to shares outstanding (note 3) $37,583,298 $30,276,303
============================================================================================
Shares outstanding:
Service Plan series 6,085,454 1,405,519
Distribution Plan series 25,920,217 28,854,117
Institutional series 5,577,627 16,667
- --------------------------------------------------------------------------------------------
Total shares outstanding 37,583,298 30,276,303
============================================================================================
Net asset value, offering and redemption price per share
(net assets divided by shares outstanding) $ 1.00 $ 1.00
============================================================================================
</TABLE>
See accompanying notes to financial statements.
19
<PAGE>
Statement of Operations
Year ended February 28, 1998
<TABLE>
<CAPTION>
Reserves
<S> <C>
- -------------------------------------------------------------------------------
Investment Income
Tax-exempt interest income (note 1) $10,364,736
- -------------------------------------------------------------------------------
Expenses
Management fees (note 4) 1,375,625
12b-1 fees (note 4) 118,178
Shareholders' servicing agent fees and expenses 446,085
Custodian's fees and expenses 55,780
Directors' fees and expenses (note 4) 5,610
Professional fees 23,126
Shareholders' reports - printing and mailing expenses 151,600
Federal and state registration fees 43,261
Other expenses 23,003
- -------------------------------------------------------------------------------
Total expenses before expense reimbursement 2,242,268
Expense reimbursement (note 4) (178,780)
- -------------------------------------------------------------------------------
Net expenses 2,063,488
- -------------------------------------------------------------------------------
Net investment income 8,301,248
Net gain from investment transactions (notes 1 and 2) --
- -------------------------------------------------------------------------------
Net increase in net assets from operations $ 8,301,248
===============================================================================
</TABLE>
See accompanying notes to financial statements.
20
<PAGE>
<TABLE>
<CAPTION>
California
-------------------------------------------------------------
Service Plan Distribution Plan Institutional
series series series Total
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income
Tax-exempt interest income (note 1) $2,866,349 $1,971,285 $869,013 $5,706,647
- ----------------------------------------------------------------------------------------------------------------------
Expenses
Management fees (note 4) 312,991 214,290 94,714 621,995
12b-1 fees (note 4) 78,990 62,307 -- 141,297
Shareholders' servicing agent fees and expenses 4,125 37,513 212 41,850
Custodian's fees and expenses 21,301 14,582 6,448 42,331
Directors' fees and expenses (note 4) 1,654 1,142 502 3,298
Professional fees 6,972 4,809 2,117 13,898
Shareholders' reports - printing and mailing expenses 8,279 16,970 2,778 28,027
Federal and state registration fees 11,026 494 1,592 13,112
Other expenses 5,849 4,052 1,791 11,692
- ----------------------------------------------------------------------------------------------------------------------
Total expenses before expense reimbursement 451,187 356,159 110,154 917,500
Expense reimbursement (note 4) (20,777) (61,479) -- (82,256)
- ----------------------------------------------------------------------------------------------------------------------
Net expenses 430,410 294,680 110,154 835,244
- ----------------------------------------------------------------------------------------------------------------------
Net investment income 2,435,939 1,676,605 758,859 4,871,403
Net gain from investment transactions (notes 1 and 2) -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $2,435,939 $1,676,605 $758,859 $4,871,403
======================================================================================================================
</TABLE>
See accompanying notes to financial statements.
21
<PAGE>
Statement of Operations - continued
Year ended February 28, 1998
<TABLE>
<CAPTION>
Massachusetts
--------------------------------------------------------------
Service Plan Distribution Plan Institutional
series series series Total
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income
Tax-exempt interest income (note 1) $296,695 $ 975,737 $168,303 $1,440,735
- -----------------------------------------------------------------------------------------------------------------------
Expenses
Management fees (note 4) 32,948 108,396 18,769 160,113
12b-1 fees (note 4) 17,119 23,932 -- 41,051
Shareholders' servicing agent fees and expenses 1,191 30,580 704 32,475
Custodian's fees and expenses 10,324 33,914 5,847 50,085
Directors' fees and expenses (note 4) 935 3,070 529 4,534
Professional fees 7,976 26,067 4,456 38,499
Shareholders' reports - printing and mailing expenses 1,155 28,498 142 29,795
Federal and state registration fees 802 776 649 2,227
Other expenses 1,086 3,599 622 5,307
- -----------------------------------------------------------------------------------------------------------------------
Total expenses before expense reimbursement 73,536 258,832 31,718 364,086
Expense reimbursement (note 4) (28,267) (109,750) (5,908) (143,925)
- -----------------------------------------------------------------------------------------------------------------------
Net expenses 45,269 149,082 25,810 220,161
- -----------------------------------------------------------------------------------------------------------------------
Net investment income 251,426 826,655 142,493 1,220,574
Net gain from investment transactions (notes 1 and 2) -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $251,426 $ 826,655 $142,493 $1,220,574
=======================================================================================================================
</TABLE>
See accompanying notes to financial statements.
22
<PAGE>
<TABLE>
<CAPTION>
New York
--------------------------------------------------------------
Service Plan Distribution Plan Institutional
series series series Total
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income
Tax-exempt interest income (note 1) $20,007 $988,441 $608 $1,009,056
- -----------------------------------------------------------------------------------------------------------------------
Expenses
Management fees (note 4) 2,239 108,502 66 110,807
12b-1 fees (note 4) 220 12,367 -- 12,587
Shareholders' servicing agent fees and expenses 1,724 29,224 26 30,974
Custodian's fees and expenses 889 44,368 27 45,284
Directors' fees and expenses (note 4) 11 609 -- 620
Professional fees 287 14,810 10 15,107
Shareholders' reports -- printing and mailing expenses 1,281 27,782 58 29,121
Federal and state registration fees 7 248 -- 255
Other expenses 62 2,814 1 2,877
- -----------------------------------------------------------------------------------------------------------------------
Total expenses before expense reimbursement 6,720 240,724 188 247,632
Expense reimbursement (note 4) (3,642) (91,510) (96) (95,248)
- -----------------------------------------------------------------------------------------------------------------------
Net expenses 3,078 149,214 92 152,384
- -----------------------------------------------------------------------------------------------------------------------
Net investment income 16,929 839,227 516 856,672
Net gain from investment transactions (notes 1 and 2) -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $16,929 $839,227 $516 $ 856,672
=======================================================================================================================
</TABLE>
See accompanying notes to financial statements.
23
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Reserves
-----------------------------
Year ended Year ended
2/28/98 2/28/97
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income $ 8,301,248 $ 8,865,233
Net realized gain (loss) from investment transactions
(notes 1 and 2) -- --
- ---------------------------------------------------------------------------------------
Net increase in net assets from operations 8,301,248 8,865,233
- ---------------------------------------------------------------------------------------
Distributions to Shareholders (note 1) (8,301,248) (8,865,233)
- ---------------------------------------------------------------------------------------
Common Share Transactions
(at constant net asset value of $1 per share) (note 1)
Net proceeds from sale of shares 175,436,062 423,698,103
Net proceeds from shares issued to shareholders
due to reinvestment of distributions 7,880,661 8,439,437
- ---------------------------------------------------------------------------------------
183,316,723 432,137,540
- ---------------------------------------------------------------------------------------
Cost of shares redeemed (216,681,366) (467,712,524)
- ---------------------------------------------------------------------------------------
Net increase (decrease) in net assets from
share transactions (33,364,643) (35,574,984)
Net assets at the beginning of year 304,087,480 339,662,464
- ---------------------------------------------------------------------------------------
Net assets at the end of year $ 270,722,837 $ 304,087,480
=======================================================================================
</TABLE>
See accompanying notes to financial statements.
24
<PAGE>
<TABLE>
<CAPTION>
California
-----------------------------------------------------------------
Year ended 2/28/98
-----------------------------------------------------------------
Service Plan Distribution Plan Institutional
series series series Total
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations
Net investment income $ 2,435,939 $ 1,676,605 $ 758,859 $ 4,871,403
Net realized gain (loss) from investment transactions
(notes 1 and 2) -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 2,435,939 1,676,605 758,859 4,871,403
- ----------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1) (2,435,939) (1,676,605) (758,859) (4,871,403)
- ----------------------------------------------------------------------------------------------------------------------------
Common Share Transactions
(at constant net asset value of $1 per share) (note 1)
Net proceeds from sale of shares 161,050,966 31,802,629 101,301,804 294,155,399
Net proceeds from shares issued to shareholders due to
reinvestment of distributions 2,277,888 1,512,816 18 3,790,722
- ----------------------------------------------------------------------------------------------------------------------------
163,328,854 33,315,445 101,301,822 297,946,121
- ----------------------------------------------------------------------------------------------------------------------------
Cost of shares redeemed (171,719,687) (36,016,099) (115,353,497) (323,089,283)
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from share
transactions (8,390,833) (2,700,654) (14,051,675) (25,143,162)
Net assets at the beginning of year 95,306,430 57,489,607 32,842,567 185,638,604
- ----------------------------------------------------------------------------------------------------------------------------
Net assets at the end of year $ 86,915,597 $ 54,788,953 $ 18,790,892 $ 160,495,442
============================================================================================================================
</TABLE>
See accompanying notes to financial statements.
25
<PAGE>
Statement of Changes in Net Assets -- continued
<TABLE>
<CAPTION>
California
------------------------------------------------------------------
Year ended 2/28/97
------------------------------------------------------------------
Service Plan Distribution Plan Institutional
series series series Total
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations
Net investment income $ 2,063,055 $ 1,895,382 $ 1,473,714 $ 5,432,151
Net realized gain (loss) from investment
transactions (notes 1 and 2) -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 2,063,055 1,895,382 1,473,714 5,432,151
- ----------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1) (2,063,055) (1,895,382) (1,473,714) (5,432,151)
- ----------------------------------------------------------------------------------------------------------------------------
Common Share Transactions
(at constant net asset value of $1 per share) (note 1)
Net proceeds from sale of shares 138,494,313 60,809,468 209,608,538 408,912,319
Net proceeds from shares issued to shareholders
due to reinvestment of distributions 1,919,782 1,593,201 47,282 3,560,265
- ----------------------------------------------------------------------------------------------------------------------------
140,414,095 62,402,669 209,655,820 412,472,584
- ----------------------------------------------------------------------------------------------------------------------------
Cost of shares redeemed (115,829,598) (77,933,155) (211,205,458) (404,968,211)
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from
share transactions 24,584,497 (15,530,486) (1,549,638) 7,504,373
Net assets at the beginning of year 70,721,933 73,020,093 34,392,205 178,134,231
- ----------------------------------------------------------------------------------------------------------------------------
Net assets at the end of year $ 95,306,430 $ 57,489,607 $ 32,842,567 $ 185,638,604
============================================================================================================================
</TABLE>
See accompanying notes to financial statements.
26
<PAGE>
<TABLE>
<CAPTION>
Massachusetts
----------------------------------------------------------------
Year ended 2/28/98
----------------------------------------------------------------
Service Plan Distribution Plan Institutional
series series series Total
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations
Net investment income $ 251,426 $ 826,655 $ 142,493 $ 1,220,574
Net realized gain (loss) from investment
transactions (notes 1 and 2) -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 251,426 826,655 142,493 1,220,574
- ---------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1) (251,426) (826,655) (142,493) (1,220,574)
- ---------------------------------------------------------------------------------------------------------------------------
Common Share Transactions
(at constant net asset value of $1 per share) (note 1)
Net proceeds from sale of shares 11,631,756 20,106,738 11,348,896 43,087,390
Net proceeds from shares issued to shareholders
due to reinvestment of distributions 252,889 812,123 21,738 1,086,750
- ---------------------------------------------------------------------------------------------------------------------------
11,884,645 20,918,861 11,370,634 44,174,140
- ---------------------------------------------------------------------------------------------------------------------------
Cost of shares redeemed (15,763,455) (22,081,518) (9,770,347) (47,615,320)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from
share transactions (3,878,810) (1,162,657) 1,600,287 (3,441,180)
Net assets at the beginning of year 9,964,264 27,082,874 3,977,340 41,024,478
- ---------------------------------------------------------------------------------------------------------------------------
Net assets at the end of year $ 6,085,454 $ 25,920,217 $ 5,577,627 $ 37,583,298
===========================================================================================================================
</TABLE>
27
See accompanying notes to financial statements.
<PAGE>
Statement of Changes in Net Assets -- continued
<TABLE>
<CAPTION>
Massachusetts
----------------------------------------------------------------
Year ended 2/28/97
----------------------------------------------------------------
Service Plan Distribution Plan Institutional
series series series Total
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations
Net investment income $ 829,383 $ 765,855 $ 126,569 $ 1,721,807
Net realized gain (loss) from investment
transactions (notes 1 and 2) (134) (365) (53) (552)
- ----------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 829,249 765,490 126,516 1,721,255
- ----------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1) (829,249) (765,490) (126,516) (1,721,255)
- ----------------------------------------------------------------------------------------------------------------------------
Common Share Transactions
(at constant net asset value of $1 per share) (note 1)
Net proceeds from sale of shares 44,456,256 21,736,601 12,606,653 78,799,510
Net proceeds from shares issued to shareholders
due to reinvestment of distributions 897,029 748,887 37,305 1,683,221
- ----------------------------------------------------------------------------------------------------------------------------
45,353,285 22,485,488 12,643,958 80,482,731
- ----------------------------------------------------------------------------------------------------------------------------
Cost of shares redeemed (73,639,600) (21,681,856) (12,216,797) (107,538,253)
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from
share transactions (28,286,315) 803,632 427,161 (27,055,522)
Net assets at the beginning of year 38,250,579 26,279,242 3,550,179 68,080,000
- ----------------------------------------------------------------------------------------------------------------------------
Net assets at the end of year $ 9,964,264 $ 27,082,874 $ 3,977,340 $ 41,024,478
============================================================================================================================
</TABLE>
28
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
New York
-----------------------------------------------------------------
Year ended 2/28/98
-----------------------------------------------------------------
Service Plan Distribution Plan Institutional
series series series Total
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations
Net investment income $ 16,929 $ 839,227 $ 516 $ 856,672
Net realized gain (loss) from investment
transactions (notes 1 and 2) -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 16,929 839,227 516 856,672
- ----------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1) (16,929) (839,227) (516) (856,672)
- ----------------------------------------------------------------------------------------------------------------------------
Common Share Transactions
(at constant net asset value of $1 per share) (note 1)
Net proceeds from sale of shares 1,014,732 14,585,479 -- 15,600,211
Net proceeds from shares issued to shareholders
due to reinvestment of distributions 13,306 854,990 -- 868,296
- ----------------------------------------------------------------------------------------------------------------------------
1,028,038 15,440,469 -- 16,468,507
- ----------------------------------------------------------------------------------------------------------------------------
Cost of shares redeemed (36,590) (12,701,915) -- (12,738,505)
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from
share transactions 991,448 2,738,554 -- 3,730,002
Net assets at the beginning of year 414,071 26,115,563 16,667 26,546,301
- ----------------------------------------------------------------------------------------------------------------------------
Net assets at the end of year $1,405,519 $ 28,854,117 $16,667 $ 30,276,303
============================================================================================================================
See accompanying notes to financial statements.
</TABLE>
29
<PAGE>
Statement of Changes in Net Assets - continued
<TABLE>
<CAPTION>
New York
-----------------------------------------------------------------
Year ended 2/28/97
-----------------------------------------------------------------
Service Plan Distribution Plan Institutional
series series series Total
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations
Net investment income $ 12,056 $ 819,638 $ 483 $ 832,177
Net realized gain (loss) from investment
transactions (notes 1 and 2) -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 12,056 819,638 483 832,177
- ----------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1) (12,056) (819,638) (483) (832,177)
- ----------------------------------------------------------------------------------------------------------------------------
Common Share Transactions
(at constant net asset value of $1 per share) (note 1)
Net proceeds from sale of shares 57,000 12,254,309 -- 12,311,309
Net proceeds from shares issued to shareholders
due to reinvestment of distributions 11,184 794,185 -- 805,369
- ----------------------------------------------------------------------------------------------------------------------------
68,184 13,048,494 -- 13,116,678
- ----------------------------------------------------------------------------------------------------------------------------
Cost of shares redeemed (208,572) (18,564,379) -- (18,772,951)
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from
share transactions (140,388) (5,515,885) -- (5,656,273)
Net assets at the beginning of year 554,459 31,631,448 16,667 32,202,574
- ----------------------------------------------------------------------------------------------------------------------------
Net assets at the end of year $ 414,071 $ 26,115,563 $16,667 $ 26,546,301
============================================================================================================================
See accompanying notes to financial statements.
</TABLE>
30
<PAGE>
Notes to Financial Statements
February 28, 1998
1. General Information and Significant Accounting Policies
The money market Funds (the "Funds") covered in this report are Nuveen Tax-Free
Reserves, Inc., a nationally diversified Fund, Nuveen California Tax-Free Fund,
Inc. (comprising the Nuveen California Tax-Free Money Market Fund) and Nuveen
Tax-Free Money Market Fund, Inc. (comprising the Nuveen Massachusetts and New
York Tax-Free Money Market Funds).
The Funds are registered under the Investment Company Act of 1940 as open-end,
diversified management investment companies. Each Fund invests in tax-exempt
money market instruments. Shares of the state Funds are issued in three series:
(1) the "Service Plan" series intended for purchase by or through banks and
other organizations who have agreed to perform certain services for their
customers who are shareholders of this series of the Fund, (2) the "Distribution
Plan" series intended for purchase by or through securities dealers who have
agreed to perform distribution and administrative services for their customers
who are shareholders of this series of the Fund and (3) the "Institutional"
series intended for purchase by trustees, bank trust departments and investment
bankers or advisers.
Each Fund issues its own shares at net asset value, which the Fund will seek to
maintain at $1.00 per share, without a sales charge.
The following is a summary of significant accounting policies followed by the
Funds in the preparation of their financial statements in accordance with
generally accepted accounting principles.
Securities Valuation
Investments in each of the Funds consist of short-term municipal securities
maturing within one year from the date of acquisition. Securities with a
maturity of more than one year in all cases have variable rate and demand
features qualifying them as short-term securities and are valued at amortized
cost. On a dollar-weighted basis, the average maturity of all such securities
must be 90 days or less (at February 28, 1998, the dollar-weighted average life
was 42 days for Reserves, 30 days for California, 58 days for Massachusetts and
33 days for New York).
Securities Transactions
Securities transactions are recorded on a trade date basis. Realized gains and
losses from such transactions are determined on the specific identification
method. Securities purchased or sold on a when-issued or delayed delivery basis
may have extended settlement periods. Any securities so purchased are subject to
market fluctuation during this period. The Funds have instructed the custodian
to segregate assets in a separate account with a current value at least equal to
the amount of the when-issued and delayed delivery purchase commitments. At
February 28, 1998, there were no such outstanding purchase commitments in any of
the Funds.
Interest Income
Interest income is determined on the basis of interest accrued, adjusted for
amortization of premiums and accretion of discounts.
Dividends and Distributions to Shareholders
Tax-exempt net investment income, adjusted for realized short-term gains and
losses on investment transactions, is declared as a dividend to shareholders of
record as of the close of each business day and payment is made or reinvestment
is credited to shareholder accounts after month-end.
Income Taxes
Each Fund is a separate taxpayer for federal income tax purposes. Each Fund
intends to comply with the requirements of the Internal Revenue Code applicable
to regulated investment companies and to distribute all of its tax-exempt net
investment income, including any net realized capital gains from investment
transactions. Therefore, no federal income tax provision is required.
Furthermore, each Fund intends to satisfy conditions which will enable interest
from municipal securities, which is exempt from regular federal income tax and
designated state income taxes for the California, Massachusetts and New York
Funds, to retain such tax exempt status when distributed to the shareholders of
the Funds. All income dividends paid during the fiscal year ended February 28,
1998, have been designated Exempt Interest Dividends. Net realized capital gain
distributions, if any, are subject to federal taxation.
Insurance Commitments
The Funds have obtained commitments (each a "Commitment") from Municipal Bond
Investors Assurance Corporation ("MBIA") with respect to certain designated
bonds held by the Funds for which credit support is furnished by banks
("Approved Banks") approved by MBIA under its established credit approval
standards. Under the terms of a Commitment, if a Fund were to determine that
certain adverse circumstances relating to the financial condition of the
Approved Banks had occurred, the Fund could cause MBIA to issue a "while-in-
fund" insurance policy covering the underlying bonds; after time and subject to
further terms and conditions, the Fund could obtain from MBIA an "insured-to-
maturity" insurance policy as to the covered bonds. Each type of insurance
policy would insure payment of interest on the bonds and payment of principal at
maturity. Although such
31
<PAGE>
Notes to Financial Statements--continued
February 28, 1998
insurance would not guarantee the market value of the bonds or the value of the
Funds' shares, the Funds believe that their ability to obtain insurance for such
bonds under such adverse circumstances will enable the Funds to hold or dispose
of such bonds at a price at or near their par value.
Derivative Financial Instruments
The Funds may invest in transactions in certain derivative financial
instruments, including futures, forward, swap and option contracts, and other
financial instruments with similar characteristics. Although the Funds are
authorized to invest in such financial instruments, and may do so in the future,
they did not make any such investments during the fiscal year ended February 28,
1998.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of increases and decreases in net
assets from operations during the reporting period.
2. Securities Transactions
Purchases and sales (including maturities) of investments in short-term
municipal securities during the fiscal year ended February 28, 1998, were as
follows:
<TABLE>
<CAPTION>
Reserves California Massachusetts New York
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Purchases $655,708,583 $328,756,802 $94,228,093 $42,274,710
Sales and Maturities 688,777,500 354,432,000 97,155,000 38,770,000
==============================================================================
</TABLE>
At February 28, 1998, the cost of investments owned for federal income tax
purposes was the same as the cost for financial reporting purposes for each
Fund.
3. Composition of Net Assets
At February 28, 1998, the Funds had common stock authorized at $.01 par value
per share. The composition of net assets as well as the number of authorized
shares were as follows:
<TABLE>
<CAPTION>
Reserves California Massachusetts New York
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital paid in:
Service Plan series $ -- $ 86,915,597 $ 6,085,454 $ 1,405,519
Distribution Plan series -- 54,788,953 25,920,217 28,854,117
Institutional series -- 18,790,892 5,577,627 16,667
---------------------------------------------------------------------------------------------
Net assets $ 270,722,837 $ 160,495,442 $ 37,583,298 $ 30,276,303
=============================================================================================
Authorized shares 2,000,000,000 2,350,000,000 2,500,000,000 2,500,000,000
=============================================================================================
</TABLE>
4. Management Fee and Other Transactions with Affiliates
Under the Funds' investment management agreement with Nuveen Advisory Corp. (the
"Adviser"), a wholly owned subsidiary of The John Nuveen Company, each Fund pays
an annual management fee, payable monthly, at the rates set forth below which
are based upon the average daily net asset value of each Fund:
<TABLE>
<CAPTION>
Management fees
----------------------------
Average daily net asset value Reserves CA, MA, NY
-------------------------------------------------------------------------
<S> <C> <C>
For the first $500 million .500 of 1% .400 of 1%
For the next $500 million .475 of 1 .375 of 1
For net assets over $1 billion .450 of 1 .350 of 1
========================================================================
</TABLE>
32
<PAGE>
Also, pursuant to a distribution agreement with the Funds, John Nuveen & Co.
Incorporated (the "Distributor"), a wholly owned subsidiary of The John Nuveen
Company, pays sales and promotion expenses in connection with the offering of
Fund shares. The Funds have adopted a Distribution Plan pursuant to Rule 12b-1
of the Investment Company Act of 1940 and a Service Plan pursuant to which the
Distribution Plan series and the Service Plan series and the Distributor pay, in
equal amounts, fees to securities dealers and service organizations for services
rendered in the distribution of shares of the Funds or the servicing of
shareholder accounts. For Reserves, total service payments to such securities
dealers and organizations on an annualized basis range from .1 of 1% to .2 of 1%
of the average daily net asset value of serviced accounts up to $10 million and
.3 of 1% for such assets over $10 million. For the California, Massachusetts and
New York Funds, total service payments to such securities dealers and
organizations are .25 of 1% per year of the average daily net asset value of
serviced accounts.
The management fee is reduced by, or the Adviser assumes certain expenses of
each Fund, in an amount necessary to prevent the total expenses of each Fund
(including the management fee and each Fund's share of service payments under
the Distribution and Service Plans, but excluding interest, taxes, fees incurred
in acquiring and disposing of portfolio securities and, to the extent permitted,
extraordinary expenses) in any fiscal year from exceeding .75 of 1% of the
average daily net asset value of Reserves, and .55 of 1% of the average daily
net asset value of the California, Massachusetts and New York Funds.
The management fee compensates the Adviser for overall investment advisory and
administrative services, and general office facilities. The Funds pay no
compensation directly to those of the Directors who are affiliated with the
Adviser or to their officers, all of whom receive remuneration for their
services to the Funds from the Adviser or its affiliates.
5. Investment Composition
At February 28, 1998, the revenue sources by municipal purpose, expressed as a
percent of total investments, were as follows:
<TABLE>
<CAPTION>
Reserves California Massachusetts New York
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Basic Materials 3% --% --% --%
Capital Goods 3 -- -- --
Consumer Cyclical 3 -- -- 9
Consumer Staples -- 4 -- --
Education and Civic Organizations 6 -- 26 19
Financials -- -- -- 7
Health Care 18 14 22 10
Housing/Multifamily 3 15 7 6
Industrial/Other 7 -- 2 6
Long Term Care 10 -- 6 7
Other Revenue 2 4 2 --
Tax Obligation/General 16 12 28 20
Tax Obligation/Limited 7 25 -- 10
Utilities 18 7 2 3
Water and Sewer 4 19 5 3
--------------------------------------------------------------------------------------
100% 100% 100% 100%
======================================================================================
</TABLE>
At February 28, 1998, certain investments in short-term municipal securities
have credit enhancements (letters of credit, guarantees or insurance) issued by
third party domestic or foreign banks or other institutions (92% for Reserves,
92% for California, 77% for Massachusetts and 96% for New York).
For additional information regarding each investment security, refer to the
Portfolio of Investments.
33
<PAGE>
Financial Highlights
Selected data for a share outstanding throughout each period is as follows:
<TABLE>
<CAPTION>
RESERVES Operating performance Less distributions
------------------------ --------------------------
Net
Net realized and Dividends Net Total
asset unrealized from tax- asset return
value Net gain (loss) exempt net Distributions value on net
Year ended beginning investment from investment from capital end of asset
February 28/29, of period income (a) investments income gains period value (b)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1998 $1.00 $.03 $-- $(.03) $-- $1.00 3.02%
1997 1.00 .03 -- (.03) -- 1.00 2.87
1996 1.00 .03 -- (.03) -- 1.00 3.23
1995 1.00 .03 -- (.03) -- 1.00 2.46
1994 1.00 .02 -- (.02) -- 1.00 1.84
1993 1.00 .02 -- (.02) -- 1.00 2.34
1992 (c) 1.00 .02 -- (.02) -- 1.00 1.45
1991 (d) 1.00 .05 -- (.05) -- 1.00 4.57
1990 (d) 1.00 .06 -- (.06) -- 1.00 5.45
1989 (d) 1.00 .06 -- (.06) -- 1.00 5.70
================================================================================================================
</TABLE>
* Annualized.
(a) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory.
(b) Total returns are calculated on net asset value and are not annualized.
(c) For the five months ended February 29.
(d) For the fiscal year ended September 30.
34
<PAGE>
<TABLE>
<CAPTION>
Ratios/Supplemental data
- -------------------------------------------------------------------
Ratio Ratio
of net of net
Ratio of investment Ratio of investment
expenses income to expenses income to
to average average to average average
net assets net assets net assets net assets
Net assets before before after after
end of period reimburse- reimburse- reimburse- reimburse-
(in thousands) ment ment ment (a) ment (a)
- -------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 270,723 .81% 2.96% .75% 3.02%
304,087 .80 2.82 .75 2.87
339,662 .79 3.18 .75 3.22
351,606 .78 2.40 .75 2.43
404,201 .80 1.78 .75 1.83
450,746 .74 2.35 .74 2.35
477,127 .75* 3.48* .75* 3.48*
451,808 .72 4.56 .72 4.56
430,206 .73 5.45 .73 5.45
390,258 .72 5.69 .72 5.69
===================================================================
</TABLE>
35
<PAGE>
Financial Highlights -- continued
Selected data for a share outstanding throughout each period is as follows:
<TABLE>
<CAPTION>
CALIFORNIA** Operating Performance Less distributions
-------------------------------------- --------------------------
Net
Net realized and Dividends Net Total
asset unrealized from tax- asset return
value Net gain (loss) exempt net Distributions value on net
Year ended beginning investment from investment from capital end of asset
February 28/29, of period income (a) investments income gains period value (b)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1998
Service Plan series $1.00 $.03 $-- $(.03) $-- $1.00 3.13%
Distribution Plan series 1.00 .03 -- (.03) -- 1.00 3.13
Institutional series 1.00 .03 -- (.03) -- 1.00 3.22
1997
Service Plan series 1.00 .03 -- (.03) -- 1.00 2.94
Distribution Plan series 1.00 .03 -- (.03) -- 1.00 2.94
Institutional series 1.00 .03 -- (.03) -- 1.00 3.02
1996
Service Plan series 1.00 .03 -- (.03) -- 1.00 3.32
Distribution Plan series 1.00 .03 -- (.03) -- 1.00 3.31
Institutional series 1.00 .03 -- (.03) -- 1.00 3.40
1995
Service Plan series 1.00 .03 -- (.03) -- 1.00 2.59
Distribution Plan series 1.00 .03 -- (.03) -- 1.00 2.60
Institutional series 1.00 .03 -- (.03) -- 1.00 2.69
1994
Service Plan series 1.00 .02 -- (.02) -- 1.00 1.94
Distribution Plan series 1.00 .02 -- (.02) -- 1.00 1.92
Institutional series 1.00 .02 -- (.02) -- 1.00 2.07
1993
Service Plan series 1.00 .02 -- (.02) -- 1.00 2.28
Distribution Plan series 1.00 .02 -- (.02) -- 1.00 2.29
Institutional series 1.00 .02 -- (.02) -- 1.00 2.36
1992(c)
Service Plan series 1.00 .02 -- (.02) -- 1.00 2.39
Distribution Plan series 1.00 .02 -- (.02) -- 1.00 2.39
Institutional series 1.00 .03 -- (.03) -- 1.00 2.45
1991(d)
Service Plan series 1.00 .05 -- (.05) -- 1.00 4.70
Distribution Plan series 1.00 .05 -- (.05) -- 1.00 4.70
Institutional series 1.00 .05 -- (.05) -- 1.00 4.80
1990 (e) 1.00 .05 -- (.05) -- 1.00 5.37
1989 (e) 1.00 .06 -- (.06) -- 1.00 5.62
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Effective for the fiscal year ended June 30, 1991, and
thereafter, the Fund has presented the per share data by series.
(a) After waiver of certain management fees or reimbursement of
expenses, if applicable, by Nuveen Advisory.
(b) Total returns are calculated on net asset value and are not
annualized.
(c) For the eight months ended February 29.
(d) For the fiscal year ended June 30.
(e) For the fiscal year ended June 30, represents combined per share data
and ratios for the Service Plan, Distribution Plan and Institutional
Series.
36
<PAGE>
<TABLE>
<CAPTION>
Ratios/Supplemental data
- --------------------------------------------------------------------------
Ratio of net Ratio
Ratio of investment Ratio of of net
expenses income to expenses investment
to average average to average income to
net assets net assets net assets average net
Net assets before before after assets after
end of period reimburse- reimburse- reimburse- reimburse-
(in thousands) ment ment ment (a) ment (a)
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 86,916 .58% 3.09% .55% 3.12%
54,789 .66 3.02 .55 3.13
18,791 .47 3.22 .47 3.22
95,306 .59 2.89 .55 2.93
57,490 .61 2.87 .55 2.93
32,843 .46 3.01 .46 3.01
70,722 .56 3.28 .54 3.30
73,020 .62 3.23 .55 3.30
34,392 .46 3.39 .46 3.39
41,772 .59 2.15 .55 2.19
67,157 .64 2.47 .55 2.56
50,772 .47 2.74 .47 2.74
415,238 .53 1.94 .53 1.94
72,380 .73 1.74 .55 1.92
32,299 .41 2.06 .41 2.06
469,812 .57 2.24 .55 2.26
80,652 .62 2.19 .55 2.26
24,156 .47 2.33 .47 2.33
478,886 .56* 3.53* .55* 3.54*
91,670 .61* 3.48* .55* 3.54*
18,334 .45* 3.64* .45* 3.64*
431,590 .57 4.65 .55 4.67
90,031 .61 4.61 .55 4.67
22,342 .45 4.77 .45 4.77
452,465 .59 5.34 .55 5.38
362,927 .57 5.68 .55 5.70
==========================================================================
</TABLE>
37
<PAGE>
Financial Highlights -- continued
Selected data for a share outstanding throughout each period is as follows:
<TABLE>
<CAPTION>
MASSACHUSETTS** Operating Performance Less distributions
---------------------------- ----------------------------
Net
Net realized and Dividends Net Total
asset unrealized from tax- asset return
value Net gain (loss) exempt net Distributions value on net
Year ended beginning investment from investment from capital end of asset
February 28/29, of period income (a) investments income gains period value (b)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1998
Service Plan series $1.00 $.03 $-- $(.03) $-- $1.00 3.05%
Distribution Plan series 1.00 .03 -- (.03) -- 1.00 3.05
Institutional series 1.00 .03 -- (.03) -- 1.00 3.05
1997
Service Plan series 1.00 .03 -- (.03) -- 1.00 2.84
Distribution Plan series 1.00 .03 -- (.03) -- 1.00 2.84
Institutional series 1.00 .03 -- (.03) -- 1.00 2.84
1996
Service Plan series 1.00 .03 -- (.03) -- 1.00 3.17
Distribution Plan series 1.00 .03 -- (.03) -- 1.00 3.17
Institutional series 1.00 .03 -- (.03) -- 1.00 3.18
1995
Service Plan series 1.00 .03 -- (.03) -- 1.00 2.53
Distribution Plan series 1.00 .03 -- (.03) -- 1.00 2.53
Institutional series 1.00 .03 -- (.03) -- 1.00 2.61
1994
Service Plan series 1.00 .02 -- (.02) -- 1.00 1.77
Distribution Plan series 1.00 .02 -- (.02) -- 1.00 1.74
Institutional series 1.00 .02 -- (.02) -- 1.00 1.80
1993
Service Plan series 1.00 .02 -- (.02) -- 1.00 2.33
Distribution Plan series 1.00 .02 -- (.02) -- 1.00 2.33
Institutional series 1.00 .02 -- (.02) -- 1.00 2.34
1992 (c)
Service Plan series 1.00 .03 -- (.03) -- 1.00 3.22
Distribution Plan series 1.00 .03 -- (.03) -- 1.00 3.22
Institutional series 1.00 .03 -- (.03) -- 1.00 3.24
1991 (d)
Service Plan series 1.00 .05 -- (.05) -- 1.00 5.30
Distribution Plan series 1.00 .05 -- (.05) -- 1.00 5.30
Institutional series 1.00 .05 -- (.05) -- 1.00 5.30
1990 (e) 1.00 .06 -- (.06) -- 1.00 5.70
1989 (e) 1.00 .05 -- (.05) -- 1.00 5.00
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Effective for the fiscal year ended June 30, 1991, and
thereafter, the Fund has presented the per share data by series.
(a) After waiver of certain management fees or reimbursement of
expenses, if applicable, by Nuveen Advisory.
(b) Total returns are calculated on net asset value and are not
annualized.
(c) For the ten months ended February 29.
(d) For the fiscal year ended April 30.
(e) For the fiscal year ended April 30, represents combined per
share data and ratios for the Service Plan, Distribution Plan and
Institutional Series.
38
<PAGE>
<TABLE>
<CAPTION>
Ratios/Supplemental data
- ------------------------------------------------------------------------------------------
Ratio of net Ratio
Ratio of investment Ratio of of net
expenses income to expenses investment
to average average to average income to
net assets net assets net assets average net
Net assets before before after assets after
end of period reimburse- reimburse- reimburse- reimburse-
(in thousands) ment ment ment (a) ment (a)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 6,085 .89% 2.71% .55% 3.05%
25,920 .95 2.65 .55 3.05
5,578 .68 2.91 .55 3.04
9,964 .74 2.64 .55 2.83
27,083 .90 2.49 .55 2.84
3,977 .61 2.78 .55 2.84
38,251 .63 3.06 .55 3.14
26,279 .84 2.87 .55 3.16
3,550 .57 3.12 .54 3.15
27,732 .61 2.49 .55 2.55
24,237 .82 2.28 .55 2.55
1,036 .47 2.63 .47 2.63
38,576 .55 1.88 .52 1.91
27,773 .76 1.67 .55 1.88
3,406 .49 1.93 .49 1.93
40,214 .73 2.16 .55 2.34
27,993 .82 2.07 .55 2.34
5,325 .58 2.31 .55 2.34
61,476 .62* 3.73* .55* 3.80*
34,509 .72* 3.63* .55* 3.80*
8,917 .53* 3.82* .53* 3.82*
37,979 .68 5.12 .55 5.25
33,809 .76 5.04 .55 5.25
14,973 .54 5.26 .54 5.26
53,631 .74 5.48 .55 5.67
31,319 .76 4.97 .55 5.18
==========================================================================================
</TABLE>
39
<PAGE>
Financial Highlights -- continued
Selected data for a share outstanding throughout each period is as
follows:
<TABLE>
<CAPTION>
NEW YORK** Operating performance Less distributions
------------------------ ----------------------------
Net
Net realized and Dividends Net Total
asset unrealized from tax- asset return
value Net gain (loss) exempt net Distributions value on net
Year ended beginning investment from investment from capital end of asset
February 28/29, of period income (a) investments income gains period value(b)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1998
Service Plan series $1.00 $.03 $-- $(.03) $-- $1.00 3.10%
Distribution Plan series 1.00 .03 -- (.03) -- 1.00 3.10
Institutional series 1.00 .03 -- (.03) -- 1.00 3.10
1997
Service Plan series 1.00 .03 -- (.03) -- 1.00 2.90
Distribution Plan series 1.00 .03 -- (.03) -- 1.00 2.90
Institutional series 1.00 .03 -- (.03) -- 1.00 2.90
1996
Service Plan series 1.00 .03 -- (.03) -- 1.00 3.20
Distribution Plan series 1.00 .03 -- (.03) -- 1.00 3.20
Institutional series 1.00 .03 -- (.03) -- 1.00 3.20
1995
Service Plan series 1.00 .02 -- (.02) -- 1.00 2.36
Distribution Plan series 1.00 .02 -- (.02) -- 1.00 2.37
Institutional series 1.00 .02 -- (.02) -- 1.00 2.28
1994
Service Plan series 1.00 .02 -- (.02) -- 1.00 1.51
Distribution Plan series 1.00 .02 -- (.02) -- 1.00 1.51
Institutional series 1.00 .02 -- (.02) -- 1.00 1.51
1993
Service Plan series 1.00 .02 -- (.02) -- 1.00 2.02
Distribution Plan series 1.00 .02 -- (.02) -- 1.00 2.02
Institutional series 1.00 .02 -- (.02) -- 1.00 2.02
1992 (c)
Service Plan series 1.00 .03 -- (.03) -- 1.00 2.94
Distribution Plan series 1.00 .03 -- (.03) -- 1.00 2.94
Institutional series 1.00 .03 -- (.03) -- 1.00 2.97
1991 (d)
Service Plan series 1.00 .05 -- (.05) -- 1.00 4.73
Distribution Plan series 1.00 .05 -- (.05) -- 1.00 4.73
Institutional series 1.00 .05 -- (.05) -- 1.00 4.73
1990 (e) 1.00 .05 -- (.05) -- 1.00 5.36
1989 (e) 1.00 .05 -- (.05) -- 1.00 4.95
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Effective for the fiscal year ended April 30, 1991, and
thereafter, the Fund has presented the per share data by series.
(a) After waiver of certain management fees or reimbursement of
expenses, if applicable, by Nuveen Advisory.
(b) Total returns are calculated on net asset value and are not
annualized.
(c) For the ten months ended February 29.
(d) For the fiscal year ended April 30.
(e) For the fiscal year ended April 30, represents combined per
share data and ratios for the Service Plan, Distribution Plan
and Institutional Series.
40
<PAGE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
- --------------------------------------------------------------------------------
Ratio of net Ratio
Ratio of investment Ratio of of net
expenses income to expenses investment
to average average to average income to
net assets net assets net assets average net
Net assets before before after assets after
end of period reimburse- reimburse- reimburse- reimburse-
(in thousands) ment ment ment(a) ment(a)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 1,406 1.20% 2.38% .55% 3.03%
28,854 .89 2.75 .55 3.09
17 1.13 2.52 .55 3.10
414 1.27 2.17 .55 2.89
26,116 .92 2.52 .55 2.89
17 1.12 2.33 .55 2.90
554 1.92 1.82 .55 3.19
31,631 .94 2.80 .55 3.19
17 1.38 2.37 .55 3.20
640 .95 1.98 .55 2.38
29,798 .79 2.14 .55 2.38
17 2.14 .79 .55 2.38
557 1.49 .69 .55 1.63
27,886 .78 1.40 .55 1.63
17 4.60 (2.42) .55 1.63
529 1.17 1.42 .55 2.04
34,827 .78 1.81 .55 2.04
17 19.33 (16.59) .55 2.19
1,934 .87* 3.19* .55* 3.51*
45,259 .71* 3.35* .55* 3.51*
17 11.89* (7.83)* .55* 3.51*
1,653 .88 4.39 .55 4.72
41,446 .69 4.58 .55 4.72
17 .62 4.65 .55 4.72
41,602 .71 5.18 .55 5.34
30,262 .86 4.74 .55 5.05
================================================================================
</TABLE>
41
<PAGE>
Report of Independent Public Accountants
To the Board of Directors and Shareholders of
Nuveen Tax-Free Reserves, Inc.
Nuveen California Tax-Free Fund, Inc.
Nuveen Tax-Free Money Market Fund, Inc.:
We have audited the accompanying statements of net assets of
Nuveen Tax-Free Reserves, Inc. (a Maryland Corporation), Nuveen
California Tax-Free Fund, Inc. (comprising the Nuveen California
Tax-Free Money Market Fund) (a Maryland Corporation) and Nuveen
Tax-Free Money Market Fund, Inc. (comprising the Nuveen
Massachusetts and New York Tax-Free Money Market Funds) (a
Minnesota Corporation), including the portfolios of investments,
as of February 28, 1998, and the related statements of operations
for the year then ended, the statements of changes in net assets
for each of the two years in the period then ended and the
financial highlights for the periods indicated thereon. These
financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities
owned as of February 28, 1998, by correspondence with the
custodian. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
net assets of each of the respective funds constituting the Nuveen
Tax-Free Reserves, Inc., Nuveen California Tax-Free Fund, Inc. and
Nuveen Tax-Free Money Market Fund, Inc. as of February 28, 1998,
the results of their operations for the year then ended, the
changes in their net assets for each of the two years in the
period then ended, and the financial highlights for the periods
indicated thereon, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
April 15, 1998
42
<PAGE>
43
<PAGE>
Building Better Portfolios with Nuveen
Reducing the impact of taxes and moderating risk are important
goals for many risk-sensitive investors seeking to build better
portfolios. For these investors, a tax-efficient, risk-resistant
investment portfolio often forms the foundation of a carefully
crafted financial plan for building and sustaining wealth. Nuveen
is committed to providing investors and their financial advisers
with a range of products and investment tools to help build better
portfolios.
Mutual Funds
Nuveen Mutual Funds offer investors access to the Nuveen family of
premier advisers, including Nuveen Advisory Corp., Institutional
Capital Corp. and Rittenhouse Financial Services. Our equity,
balanced and income funds seek to provide consistent performance,
time-tested strategies to reduce risk and experienced,
professional management.
Private Asset Management
Rittenhouse Financial Services and Nuveen Asset Management offer
comprehensive, customized investment management solutions to
investors with assets of $250,000 or more. A range of actively
managed growth, balanced and municipal income-oriented portfolios
are available, all based upon a disciplined investment philosophy.
Unit Trusts
Nuveen Unit Trusts are fixed portfolios of quality securities that
are a convenient, attractive alternative to purchasing individual
securities. They provide low-cost diversification to reduce risk,
experienced, professional security selection and surveillance, and
daily liquidity at that day's net asset value for quick access to
your assets.
Exchange-Traded Funds
Nuveen Exchange-Traded Funds offer investors actively managed
portfolios of investment-grade quality municipal bonds. The fund
shares are listed and traded on the New York and American stock
exchanges. Exchange-traded funds provide the investment
convenience, price visibility and liquidity of common stocks.
MuniPreferred/R/
Nuveen MuniPreferred offers investors a AAA-rated investment with
an attractive tax-free yield for the cash reserves portion of an
investment portfolio. MuniPreferred shares are backed 2-to-1 by
the long-term portfolios of Nuveen dual-class exchange-traded
funds and are available for national as well as a wide variety of
state-specific portfolios.
Nuveen Family of Mutual Funds
Nuveen offers a variety of funds designed to help you reach
your financial goals.
Growth
Nuveen Rittenhouse Growth Fund
Growth and Income
Growth and Income Stock Fund
Balanced Stock and Bond Fund
Balanced Municipal and Stock Fund
Tax-Free Income
National Funds
Long-Term Insured Intermediate-Term Limited Term
State Funds
Alabama
Arizona
California
Colorado
Connecticut
Florida
Georgia
Kansas
Kentucky
Louisiana
Maryland
Massachusetts
Michigan
Missouri
New Jersey
New Mexico
New York
North Carolina
Ohio
Pennsylvania
South Carolina
Tennessee
Virginia
Wisconsin
44
<PAGE>
Fund Information
Board of Directors Custodian
Robert P. Bremner The Chase Manhattan Bank
Lawrence H. Brown 4 New York Plaza
Anthony T. Dean New York, NY 10004-2413
Anne E. Impellizzeri (800) 257-8787
Peter R. Sawers
William J. Schneider Transfer Agent,
Timothy R. Schwertfeger
Judith M. Stockdale Shareholder Services and
Fund Manager Dividend Disbursing Agent
Nuveen Advisory Corp. Shareholder Services, Inc.
333 West Wacker Drive Nuveen Investor Services
Chicago, IL 60606 P.O. Box 5330
Denver, CO 80217-5330
(800) 621-7227
Legal Counsel
Fried, Frank, Harris,
Shriver & Jacobson
Washington, D.C.
Public Accountants
Arthur Andersen LLP
Chicago, IL
45
<PAGE>
[PHOTO OF JOHN NUVEEN, SR. APPEARS HERE]
John Nuveen, Sr.
Serving Investors for Generations
Since our founding in 1898, John Nuveen & Co. has been synonymous with
investments that withstand the test of time. Today, we offer a broad range of
investments designed for risk-sensitive individuals seeking to build and sustain
wealth. In fact, more than 1.3 million investors have trusted Nuveen to help
them maintain the lifestyle they currently enjoy.
The cornerstone of Nuveen's investment philosophy is a commitment to disciplined
long-term investment strategies focused on providing consistent, attractive
performance over time - with moderated risk. We emphasize quality securities
carefully chosen through in-depth research, and we follow those securities
closely over time to ensure that they continue to meet our exacting standards.
Whether your focus is long-term growth, dependable current income or sustaining
accumulated wealth, Nuveen offers a wide variety of products and services to
help meet your unique circumstances and financial planning needs. Our equity,
balanced, and income funds, along with our unit trusts and private asset
management, can form the foundation of a tax-efficient and risk-resistant
portfolio.
Talk with your financial adviser to learn more about how Nuveen investment
products and services can help you build and sustain your long-term financial
security. Or call us at (800) 621-7227 for more information, including a
prospectus where applicable. Please read that information carefully before you
invest.
NUVEEN
OUR SECOND CENTURY 1898/1998
helping investors sustain the wealth of a lifetime.(TM)
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
www.nuveen.com
<PAGE>
PART C--OTHER INFORMATION
NUVEEN CALIFORNIA TAX-FREE FUND, INC.
333 West Wacker Drive
Chicago, Illinois 60606
<PAGE>
PART C--OTHER INFORMATION
ITEM 24: FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements:
Included in the Prospectus for the Nuveen California Tax-Free Money Market
Fund:
Financial Highlights
Included in the Statement of Additional Information through incorporation
by reference to the Registrant's Annual Report to Shareholders:
Portfolio of Investments, February 28, 1998
Statement of Net Assets, February 28, 1998
Statement of Operations, Year Ended February 28, 1998
Statement of Changes in Net Assets, Years Ended February 28, 1998, and
February 28, 1997
Report of Independent Public Accountants dated April 15, 1998
(b) Exhibits:
<TABLE>
<C> <S>
1(a). Articles of Incorporation of Registrant, as amended and
supplemented. Filed as Exhibit 1 to Post-Effective Amendment No. 19
to Registrant's Registration Statement on Form N-1A (File No. 33-
01971) and incorporated by reference thereto.
1(b). Articles of Amendment to the Articles of Incorporation. Filed as
Exhibit 1 to Post-Effective Amendment No. 23 to Registrant's
Registration Statement on Form N-1A (File No. 33-01971) and
incorporated by reference thereto.
2. By-Laws of Registrant, as amended. Filed as Exhibit 2 to Post-
Effective Amendment No. 13 to Registrant's Registration Statement on
Form N-1A (File No. 33-01971) and incorporated herein by reference
thereto.
3. Not applicable.
4. Specimen certificates of shares of Capital Stock of Registrant.
Filed as Exhibit 4 to Post-Effective Amendment No. 23 to
Registrant's Registration Statement on Form N-1A (File No. 33-01971)
and is incorporated herein by reference thereto.
5(a). Investment Management Agreement between Registrant and Nuveen
Advisory Corp., dated April 27, 1992. Filed as Exhibit 5(a) to Post-
Effective Amendment No. 12 to Registrant's Registration Statement on
Form N-1A (File No. 33-01971) and incorporated herein by reference
thereto.
5(b). Amendment and Renewal of Investment Management Agreement between
Registrant and Nuveen Advisory Corp., dated April 21, 1993. Filed as
Exhibit 5(b) to Post-Effective Amendment No. 15 to Registrant's
Registration Statement on Form N-1A (File No. 33-01971) and
incorporated herein by reference thereto.
5(c). Renewal, dated May 5, 1998, of Investment Management Agreement.
6(a). Distribution Agreement dated as of January 2, 1990 between
Registrant and John Nuveen & Co. Incorporated. Filed as Exhibit 6 to
Post-Effective Amendment No. 7 to Registrant's Registration
Statement on Form N-1A (File No. 33-01971) and incorporated herein
by reference thereto.
</TABLE>
C-1
<PAGE>
<TABLE>
<C> <S>
6(b). Renewal, dated July 31, 1997, of Distribution Agreement.
7. Not applicable.
8. 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. 15
to Registrant's Registration Statement on Form N-1A (File No. 33-01971) and
incorporated herein by reference thereto.
8(b). Letter evidencing assignment of U.S. Trust Company of New York's rights and re-
sponsibilities under the Custody Agreement to The Chase Manhattan Bank. Filed as
Exhibit 8(b) to Post-Effective Amendment No. 22 to Registrant's Registration
Statement on Form N-1A (File No. 33-01971) and incorporated herein by reference
thereto.
9(a). Transfer Agency Agreement between Registrant and Shareholder Services, Inc.,
dated July 1, 1997.
9(b). Service Plan and related form of Service Agreement adopted with respect to
shares of the Registrant's Money Market Portfolio Class--Service Plan Series.
Filed as Exhibit 9(b) to Pre-Effective Amendment No. 1 to Registrant's
Registration Statement on Form N-1A (File No. 33-01971) and incorporated herein
by reference thereto.
9(c). Service Agreement, as amended, relating to the Service Plan and adopted with
respect to shares of the Registrant's Service Plan Series. Filed as Exhibit 9(c)
to Post-Effective Amendment No. 11 to Registrant's Registration Statement on
Form N-1A (File No. 33-01971) and incorporated herein by reference thereto.
10. Opinion of Morgan, Lewis & Bockius LLP.
11. Consent of Independent Public Accountants.
12. Not applicable.
13. Subscription Agreement of Nuveen Advisory Corp., dated November 29, 1985. Filed
as Exhibit 13 to Registrant's Registration Statement on Form N-1A (File
No. 33-01971) and incorporated herein by reference thereto.
14. Not applicable.
15(a). Distribution Plan and related form of Service Agreement adopted under Rule 12b-1
with respect to shares of the Registrant's Money Market Portfolio Class--
Distribution Plan Series. Filed as Exhibit 15 to Pre-Effective Amendment No. 1
to Registrant's Registration Statement on Form N-1A (File No. 33-01971) and
incorporated herein by reference thereto.
15(b). Distribution and Service Agreement, as amended, relating to the Distribution
Plan and adopted with respect to shares of the Registrant's Distribution Plan
Series. Filed as Exhibit 15(b) to Post-Effective Amendment No. 3 to Registrant's
Registration Statement on Form
N-1A (File No. 33-01971) and incorporated herein by reference thereto.
</TABLE>
C-2
<PAGE>
<TABLE>
<C> <S>
15(c). Plan of Distribution and Service Pursuant to Rule 12b-1 for the Class A Shares
and Class C Shares of Nuveen California Tax-Free Value Fund and Nuveen California
Insured Tax-Free Value Fund, dated September 6, 1994. Filed as Exhibit 15(c) to
Post-Effective Amendment No. 20 to Registrant's Registration Statement on Form N-
1A (File No. 33-01971) and incorporated herein by reference thereto.
15(d). Renewal, dated July 26, 1995, of Plan of Distribution and Service Pursuant to
Rule 12b-1 filed as Exhibit 15(d) to Post-Effective Amendment No. 22 to
Registrant's Registration Statement on Form N-1A (File No. 33-01971) and
incorporated herein by reference thereto.
16. Schedule of Computation of Performance Figures.
17. Financial Data Schedule.
18. Multiple Class Plan Adopted Pursuant to Rule 18f-3, as amended, filed as Exhibit
18 to Post-Effective Amendment No. 22 to Registrant's Registration Statement on
Form N-1A (File No. 33-01971) and incorporated herein by reference thereto.
99(a). Municipal Bond Guaranty Master Managed Fund Insurance Policies issued to the
Registrant by Municipal Bond Investors Assurance Corporation. Filed as Exhibit
16(a) to Post-Effective Amendment No. 2 to the Registrant's Registration
Statement on Form N-1A (File No. 33-01971) and incorporated herein by reference
thereto.
99(b). Agreement for a Money Market Fund Insurance Program. Filed as Exhibit 19 to Post-
Effective Amendment No. 15 to Registrant's Registration Statement on Form N-1A
(File No. 33-01971) and incorporated herein by reference thereto.
99(c). Certified copy of resolution of Board of Directors authorizing the signing of the
names of directors and officers on the Registration Statement pursuant to power
of attorney.
99(d). Original Power of Attorney for Judith M. Stockdale authorizing, among others,
Gifford R. Zimmerman and Larry W. Martin to execute the Registration Statement on
her behalf as one of the Registrant's Directors. Original Powers of Attorney for
all of Registrant's other Directors authorizing, among others, Gifford R.
Zimmerman and Larry W. Martin to execute the Registration Statement were filed as
Exhibit 99(d) to Post-Effective Amendment No. 23 to Registrant's Registration
Statement on Form N-1A (File No. 33-01971) and is incorporated herein by
reference thereto.
99(e). Code of Ethics and Reporting Requirements. Filed as Exhibit 99(i) to Post-
Effective Amendment No. 19 to Registrant's Registration Statement on Form N-1A
(File No.
33-01971) and incorporated herein by reference thereto.
99(f). Articles of Transfer between Nuveen California Tax-Free Fund, Inc. and Nuveen
Flagship Multistate Trust II. Filed as Exhibit 99(f) to Post-Effective Amendment
No. 23 to Registrant's Registration Statement on Form N-1A (File No. 33-01971)
and is incorporated herein by reference thereto.
</TABLE>
ITEM 25: PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not Applicable.
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<PAGE>
ITEM 26: NUMBER OF HOLDERS OF SECURITIES
As of May 19, 1998:
<TABLE>
<CAPTION>
NUMBER OF
TITLE OF SERIES RECORD HOLDERS
--------------- --------------
<S> <C>
Nuveen California Tax-Free Money Market Fund,
Institutional Series..................................... 7
Distribution Plan Series................................. 1,206
Service Plan Series...................................... 101
</TABLE>
ITEM 27: INDEMNIFICATION
Article NINTH of the Registrant's Articles of Incorporation provides as fol-
lows:
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 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 its 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
C-4
<PAGE>
"interested persons" of the Corporation as defined in the Investment Com-
pany Act of 1940 nor parties to the proceeding, or (b) an independent legal
counsel in a written opinion.
The directors and officers of the Registrant are covered by an Investment
Trust Errors and Omission policy in the aggregate amount of $20,000,000 (with
a maximum deductible of $500,000) against liability and expenses of claims of
wrongful acts arising out of their position with the Registrant, except for
matters which involve willful acts, bad faith, gross negligence and willful
disregard of duty (i.e., where the insured did not act in good faith for a
purpose he or she reasonably believed to be in the best interest of Registrant
or where he or she had reasonable cause to believe this conduct was unlawful).
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to the officers, directors or controlling persons of the
Registrant pursuant to the Articles of Incorporation of the Registrant or oth-
erwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as ex-
pressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by an officer or director or control-
ling person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such officer, director or controlling persons in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling pre-
cedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
ITEM 28: BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Nuveen Advisory Corp. serves as investment adviser to the following open-end
management type investment companies: Nuveen Flagship Multistate Trust I,
Nuveen Flagship Multistate Trust II, Nuveen Flagship Multistate Trust III,
Nuveen Flagship Multistate Trust IV, Nuveen Flagship Municipal Trust, Flagship
Admiral Funds Inc., Nuveen California Tax-Free Fund, Inc., Nuveen Tax-Free
Money Market Fund, Inc., Nuveen Tax-Exempt Money Market Fund, Inc., and Nuveen
Tax-Free Reserves, Inc. It also serves as investment adviser to the following
closed-end management type investment companies: Nuveen Municipal Value Fund,
Inc., Nuveen California Municipal Value Fund, Inc., Nuveen New York Municipal
Value Fund, Inc., Nuveen Municipal Income Fund, Inc., Nuveen Premium Income
Municipal Fund, Inc., Nuveen Performance Plus Municipal Fund, Inc., Nuveen
California Performance Plus Municipal Fund, Inc., Nuveen New York Performance
Plus Municipal Fund, Inc., Nuveen Municipal Advantage Fund, Inc., Nuveen Mu-
nicipal Market Opportunity Fund, Inc., Nuveen California Municipal Market Op-
portunity Fund, Inc., Nuveen Investment Quality Municipal Fund, Inc., Nuveen
California Investment Quality Municipal Fund, Inc., Nuveen New York Investment
Quality Municipal Fund, Inc., Nuveen Insured Quality Municipal Fund, Inc.,
Nuveen Florida Investment Quality 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 Mu-
nicipal Fund, Inc., Nuveen Texas Quality Income Municipal Fund, Nuveen Cali-
fornia Quality Income Municipal Fund, Inc., Nuveen New York Quality Income Mu-
nicipal Fund, Inc., Nuveen Premier Municipal Income Fund, Inc., Nuveen Premier
Insured Municipal Income Fund, Inc., Nuveen Premium
C-5
<PAGE>
Income Municipal Fund 2, Inc., Nuveen Insured California Premium Income Munic-
ipal Fund, Inc., Nuveen Insured New York Premium Income Municipal Fund, Inc.,
Nuveen Select Maturities Municipal Fund, Nuveen Arizona Premium Income Munici-
pal Fund, Inc., Nuveen Insured Florida Premium Income Municipal Fund, Nuveen
Michigan Premium Income Municipal Fund, Inc., Nuveen New Jersey Premium Income
Municipal Fund, Inc., Nuveen Premium Income Municipal Fund 4, Inc., Nuveen In-
sured California Premium Income Municipal Fund 2, Inc., Nuveen Pennsylvania
Premium Income Municipal Fund 2, Nuveen Maryland Premium Income Municipal
Fund, Nuveen Massachusetts Premium Income Municipal Fund, Nuveen Virginia Pre-
mium Income Municipal Fund, Nuveen Washington Premium Income Municipal Fund,
Nuveen Connecticut Premium Income Municipal Fund, Nuveen Georgia Premium In-
come Municipal Fund, Nuveen Missouri Premium Income Municipal Fund, Nuveen
North Carolina Premium Income Municipal Fund, Nuveen California Premium Income
Municipal Fund and Nuveen Insured Premium Income Municipal Fund 2. Nuveen Ad-
visory Corp. has no other clients or business at the present time. The princi-
pal business address for all these investment companies is 333 West Wacker
Drive, Chicago, Illinois 60606.
For a description of other business, profession, vocation or employment of a
substantial nature in which any director or officer, other than Timothy R.
Schwertfeger and Anthony T. Dean, of the investment adviser has engaged during
the last two years for his account or in the capacity of director, officer,
employee, partner or trustee, see the descriptions under "Management" in the
Statement of Additional Information.
Timothy R. Schwertfeger is Chairman and Director of Nuveen Advisory Corp., the
investment adviser. Mr. Schwertfeger has, during the last two years, been
Chairman and formerly Executive Vice President and Director of The John Nuveen
Company, John Nuveen & Co. Incorporated, and Nuveen Institutional Advisory
Corp.; Chairman and Director (since January 1997) of Nuveen Asset Management,
Inc.; Director (since 1996) of Institutional Capital Corporation. Anthony T.
Dean is President and Director of Nuveen Advisory Corp., the investment advis-
er. Mr. Dean has, during the last two years, been Executive Vice President and
Director of The John Nuveen Company and John Nuveen & Co. Incorporated; and
Director of Nuveen Institutional Advisory Corp.; President and Director (since
January 1997) of Nuveen Asset Management, Inc.; Chairman and Director of Rit-
tenhouse Financial Services, Inc.
ITEM 29: PRINCIPAL UNDERWRITERS
(a) John Nuveen & Co. Incorporated (Nuveen) acts as principal underwriter to
the following open-end management type investment companies: Nuveen Flagship
Multistate Trust I, Nuveen Flagship Multistate Trust II, Nuveen Flagship
Multistate Trust III, Nuveen Flagship Multistate Trust IV, Nuveen Flagship Mu-
nicipal Trust, Nuveen California Tax-Free Fund, Inc., Nuveen Tax-Free Money
Market Fund, Inc., Nuveen Tax-Exempt Money Market Fund, Inc., Nuveen Tax-Free
Reserves, Inc., Flagship Admiral Funds Inc., Nuveen Investment Trust and
Nuveen Investment Trust II. Nuveen also acts as depositor and principal under-
writer of the Nuveen Tax-Exempt Unit Trust and Nuveen Unit Trusts, registered
unit investment trusts. Nuveen also has served or is serving as co-managing
underwriter of the shares of the following closed-end management type invest-
ment 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 Perfor-
mance Plus Municipal Fund, Inc., Nuveen California Performance Plus Municipal
Fund, Inc., Nuveen New York Performance Plus Municipal Fund, Inc., Nuveen Mu-
nicipal Advantage
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<PAGE>
Fund, Inc., Nuveen Municipal Market Opportunity Fund, Inc., Nuveen California
Municipal Market Opportunity Fund, Inc., Nuveen Investment Quality Municipal
Fund, Inc., Nuveen California Investment Quality Municipal Fund, Inc., Nuveen
New York Investment Quality Municipal Fund, Inc., Nuveen Insured Quality Mu-
nicipal Fund, Inc., Nuveen Florida Investment Quality Municipal Fund, Nuveen
New Jersey Investment Quality Municipal Fund, Inc., Nuveen Pennsylvania In-
vestment 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 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 Munici-
pal 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 Munici-
pal Fund, Nuveen Arizona Premium Income Municipal Fund, Inc., Nuveen Insured
Florida Premium Income Municipal Fund, Nuveen Michigan Premium Income Munici-
pal Fund, Inc., Nuveen New Jersey Premium Income Municipal Fund, Inc., Nuveen
Premium Income Municipal Fund 4, Inc., Nuveen Insured California Premium In-
come Municipal Fund 2, Inc., Nuveen Pennsylvania Premium Income Municipal Fund
2, Nuveen Maryland Premium Income Municipal Fund, Nuveen Massachusetts Premium
Income Municipal Fund, Nuveen Virginia Premium Income Municipal Fund, Nuveen
Washington Premium Income Municipal Fund, Nuveen Connecticut Premium Income
Municipal Fund, Nuveen Georgia Premium Income Municipal Fund, Nuveen Missouri
Premium Income Municipal Fund, Nuveen North Carolina Premium Income Municipal
Fund, Nuveen California Premium Income Municipal Fund, Nuveen Insured Premium
Income Municipal Fund 2, Nuveen Select Tax-Free Income Portfolio 2, Nuveen In-
sured California Select Tax-Free Income Portfolio, Nuveen Insured New York Se-
lect Tax-Free Income Portfolio and Nuveen Select Tax-Free Income Portfolio 3.
(b)
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER WITH REGISTRANT
- -----------------------------------------------------------------------------
<S> <C> <C>
Timothy R. Schwertfeger Chairman of the Board, Chairman of the Board
333 West Wacker Drive Chief Executive Officer and Director
Chicago, Illinois 60606 and Director
Anthony T. Dean President and Director President and Director
333 West Wacker Drive
Chicago, Illinois 60606
John P. Amboian Executive Vice President None
333 West Wacker Drive and Chief Financial Officer
Chicago, IL 60606
Bruce P. Bedford Executive Vice President Executive Vice President
333 West Wacker Drive
Chicago, IL 60606
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
POSITIONS AND
NAME AND PRINCIPAL POSITIONS AND OFFICES OFFICES
BUSINESS ADDRESS WITH UNDERWRITER WITH REGISTRANT
- ------------------------------------------------------------------------------------
<S> <C> <C>
William Adams IV Vice President None
333 West Wacker Drive
Chicago, Illinois 60606
Alan G. Berkshire Vice President Vice President and
333 West Wacker Drive and Secretary Assistant Secretary
Chicago, IL 60606
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, Illinois 60606
Stephen D. Foy Vice President Vice President and
333 West Wacker Drive Controller
Chicago, Illinois 60606
Robert D. Freeland Vice President None
333 West Wacker Drive
Chicago, Illinois 60606
Michael G. Gaffney Vice President None
333 West Wacker Drive
Chicago, Illinois 60606
Anna R. Kucinskis Vice President Vice President
333 West Wacker Drive
Chicago, Illinois 60606
Robert B. Kuppenheimer Vice President None
333 West Wacker Drive
Chicago, Illinois 60606
Larry W. Martin Vice President and Vice President and
333 West Wacker Drive Assistant Secretary Assistant Secretary
Chicago, Illinois 60606
Thomas C. Muntz Vice President None
333 West Wacker Drive
Chicago, Illinois 60606
Stuart W. Rogers Vice President None
333 West Wacker Drive
Chicago, Illinois 60606
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
POSITIONS AND
NAME AND PRINCIPAL POSITIONS AND OFFICES OFFICES
BUSINESS ADDRESS WITH UNDERWRITER WITH REGISTRANT
- ------------------------------------------------------------------------------
<S> <C> <C>
Bradford W. Shaw, Jr. Vice President None
333 West Wacker Drive Chicago, Illi-
nois 60606
H. William Stabenow Vice President Vice President and
333 West Wacker Drive and Treasurer Treasurer
Chicago, Illinois 60606
Paul C. Williams Vice President None
333 West Wacker Drive
Chicago, Illinois 60606
Gifford R. Zimmerman Vice President and Vice President and
333 West Wacker Drive Assistant Secretary Secretary
Chicago, Illinois 60606
</TABLE>
(c) Not applicable.
ITEM 30: LOCATION OF ACCOUNTS 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 services 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 capacity
for the Registrant.
ITEM 31: MANAGEMENT SERVICES
Not applicable.
ITEM 32: UNDERTAKINGS
(a) Not applicable.
(b) Not applicable.
(c) The Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of the Registrant's latest Annual Report to Share-
holders upon request and without charge.
C-9
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933 AND THE INVESTMENT
COMPANY ACT OF 1940, THE REGISTRANT CERTIFIES THAT THIS REGISTRATION STATEMENT
MEETS ALL THE REQUIREMENTS FOR EFFECTIVENESS UNDER PARAGRAPH (B) OF RULE 485 OF
THE SECURITIES ACT OF 1933 AND HAS DULY CAUSED THIS REGISTRATION STATEMENT TO
BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE
CITY OF CHICAGO, AND STATE OF ILLINOIS, ON THE 15TH DAY OF JUNE, 1998.
NUVEEN CALIFORNIA TAX-FREE FUND, INC.
/s/ Gifford R. Zimmerman
--------------------------------------------
Gifford R. Zimmerman, Vice President
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE CAPACITIES AND
ON THE DATE INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Stephen D. Foy
- -------------------------------
Stephen D. Foy Vice President and June 15, 1998
Controller (Principal
Financial and
Accounting Officer)
Timothy R. Schwertfeger Chairman of the Board
and Director (Principal
Executive Officer)
Anthony T. Dean President and Director
Robert P. Bremner Director
Lawrence H. Brown Director
Anne E. Impellizzeri Director
Peter R. Sawers Director
William J. Schnieder Director
Judith M. Stockdale Director
</TABLE>
/s/ Gifford R. Zimmerman
By ________________________
Gifford R. Zimmerman
Attorney-in-Fact
June 15, 1998
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.
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBIT PAGE
------- ------- ------------
<C> <S> <C>
5(c). Renewal, dated May 5, 1998, of Investment Management
Agreement.
6(b). Renewal, dated July 31, 1997, of Distribution Agree-
ment.
9(a). Transfer Agency Agreement dated July 1, 1997.
10. Opinion of Morgan, Lewis & Bockius LLP
11. Consent of Independent Public Accountants.
16. Schedule of Computation of Performance Figures.
17. Financial Data Schedule.
99(c). Certified copy of resolution of Board of Directors
authorizing the signing of the names of directors and
officers on the Registrant's Registration Statement
pursuant to power of attorney.
99(d). Original Powers of Attorney for Judith M. Stockdale
authorizing, among others, Gifford R. Zimmerman and
Larry W. Martin to execute the Registration Statement
on her behalf as one of the Registrant's Directors.
</TABLE>
<PAGE>
EXHIBIT 5(c)
NUVEEN CALIFORNIA TAX-FREE FUND, INC.
RENEWAL OF INVESTMENT MANAGEMENT AGREEMENT
------------------------------------------
This Agreement made this 5th day of May, 1998 by and between Nuveen California
Tax-Free Fund, Inc., a Maryland corporation (the "Fund"), and Nuveen Advisory
Corp., a Delaware corporation (the "Adviser");
WHEREAS, the parties hereto are the contracting parties under that certain
Investment Management Agreement (the "Agreement") pursuant to which the Adviser
furnishes investment management and other services to the Fund; and
WHEREAS, the Agreement terminates August 1, 1998 unless continued in the manner
required by the Investment Company Act of 1940; and
WHEREAS, the Board of Directors, at a meeting called for the purpose of
reviewing the Agreement, have approved the Agreement and its continuance until
August 1, 1999 in the manner required by the Investment Company Act of 1940.
NOW THEREFORE, in consideration of the mutual covenants contained in the
Agreement the parties hereto do hereby continue the Agreement in effect until
August 1, 1999 and ratify and confirm the Agreement in all respects.
NUVEEN CALIFORNIA
TAX-FREE FUND, INC.
By: /s/ Gifford R. Zimmerman
------------------------------
Vice President
ATTEST:
/s/ Karen L. Healy
- -----------------------------
Assistant Secretary
NUVEEN ADVISORY CORP.
By: /s/ Edward F. Neild
------------------------------
Vice President
ATTEST:
/s/ Larry W. Martin
- -----------------------------
Assistant Secretary
<PAGE>
EXHIBIT 6(b)
Renewal of Distribution Agreement
---------------------------------
This Agreement made this 31st day of July, 1997 by and between Nuveen California
Tax-Free Fund, Inc., a Maryland corporation (the "Fund"), and John Nuveen & Co.
Incorporated, a Delaware corporation (the "Underwriter");
WHEREAS, the parties hereto are the contracting parties under that certain
Distribution Agreement (the "Agreement") pursuant to which the Underwriter acts
as agent for the distribution of shares of the Fund; and
WHEREAS, the Agreement terminates August 1, 1997 unless continued in the manner
required by the Investment Company Act of 1940; and
WHEREAS, the Board of Directors of the Fund, at a meeting called for the purpose
of reviewing the Agreement has approved the Agreement and its continuance until
August 1, 1998 in the manner required by the Investment Company Act of 1940;
NOW THEREFORE, in consideration of the mutual covenants contained in the
Agreement the parties hereto do hereby continue the Agreement in effect until
August 1, 1998 and ratify and confirm the Agreement in all respects.
NUVEEN CALIFORNIA TAX-FREE FUND, INC.
By: /s/ Gifford R. Zimmerman
------------------------------
Vice President
ATTEST:
/s/ Karen L. Healy
- -----------------------------
Assistant Secretary
JOHN NUVEEN & CO. INCORPORATED
By: /s/ Anna R. Kucinskis
------------------------------
Vice President
ATTEST:
/s/ Larry Martin
- -----------------------------
Assistant Secretary
<PAGE>
Exhibit 9(a)
NUVEEN CALIFORNIA TAX-FREE FUND, INC.
TRANSFER AGENCY AGREEMENT
This agreement is made as of the 1st day of July, 1997, between NUVEEN
CALIFORNIA TAX-FREE FUND, INC., a Maryland corporation having its principal
office and place of business at 333 West Wacker Drive, Chicago, Illinois 60606
(hereinafter referred to as the "Fund"), and SHAREHOLDER SERVICES, INC., a
Colorado corporation having its place of business at 6803 South Tucson Way,
Englewood, Colorado 80112 (hereinafter referred to as the "Transfer Agent").
In consideration of the mutual promises hereinafter set forth, the parties
hereto covenant and agree as follows:
ARTICLE 1
DEFINITIONS
Whenever used in this Agreement, the following words and phrases shall have
the following meanings:
1.1 "Approved Institution" shall mean a broker-dealer, broker, bank or
other entity named in a Certificate, as hereinafter defined, and having
account(s) in the Fund or the Distributor or an agent it appoints, in each case
acting on behalf of the Fund for the benefit of its clients. From time to time
the Fund may amend a previously delivered Certificate by delivering to the
Transfer Agent a Certificate naming an additional entity as an Approved
Institution or deleting any entity named as an Approved Institution in a
previously delivered Certificate.
1.2 "Business Day" shall mean each day on which the New York Stock
Exchange is open for trading.
1.3 "Certificate" shall mean any notice, instruction, or other instrument
in writing, authorized or required by this Agreement to be given to the Transfer
Agent by the Fund and which is signed by any Officer, as hereinafter defined,
and actually received by the Transfer Agent. "Certificate" shall also include
any notice submitted to the Transfer Agent by electronic or telephone
transmission, reasonably believed by the Transfer Agent to be genuine and to
have been properly made, signed or authorized by an Officer.
1.4 "Computer Tape" shall mean any computer/electromagnetic tape or
transmission transmitted by an Approved Institution, via a remote terminal or
other similar link, into a data processing, storage, or collection system or
similar system (the "System"), located on the Transfer Agent's premises. For
purposes of Section 5.1, such Computer Tape shall be deemed to have been
furnished at such times as are agreed upon from time to time by the Transfer
Agent and Fund only if the information reflected thereon was input into the
system at such times as are agreed upon from time to time by the Transfer Agent
and the Fund.
1.5 "Custodian" shall mean, with respect to the Fund, Chase Manhattan Bank
of New York as custodian under the terms and conditions of the Custody Agreement
between the Custodian and the
Page 1
<PAGE>
Fund, or in any case any successor(s) to such Custodian performing similar
functions for or on behalf of the Fund.
1.6 "Direct Accounts" means accounts registered in the name(s) of
shareholders other than Approved Institutions.
1.7 "Distributor" shall mean John Nuveen & Co. Incorporated (hereinafter
referred to as "Nuveen & Co."), as distributor under the terms and conditions of
the Distributor's Contract between the Fund and Nuveen & Co., wherein Nuveen &
Co. has the exclusive right to sell shares of the Fund to investors against
orders therefor at net asset value, or any successor(s) to Nuveen & Co.
performing a similar function for or on behalf of the Fund.
1.8 "Effective Date" shall mean July 1, 1997 or the date the Fund begins
operations.
1.9 "Series" shall mean each individual portfolio of the Fund, if any,
each being a separate portfolio of securities and other assets, interests in
which are represented by a separate series of the Fund's shares, and such terms
shall include any other such portfolio that may be created for which the
Transfer Agent agrees to act as transfer agent pursuant to Article 10 of this
Agreement.
1.10 "Officer" shall mean the Fund's Chairman of the Board, President, any
Vice President, Secretary, any Assistant Secretary, Treasurer, any Assistant
Treasurer and any other person duly authorized by the Board of Directors of the
Fund to execute or give any Certificate on behalf of the Fund and named in the
Certificate annexed hereto as Appendix A, as such Certificate may be amended
from time to time.
1.11 "Prospectus" shall mean the most current Fund prospectus and statement
of additional information relating to the Shares, actually received by the
Transfer Agent from the Fund and shall include to the extent applicable, shares
designated as comprising any and all classes of any series of the Fund.
1.12 "Shares" shall mean full or fractional shares comprising all or any
part of each series representing the beneficial interest in the Fund and shall
include to the extent applicable, shares designated as comprising any and all
classes of any series of the Fund.
ARTICLE 2
APPOINTMENT OF TRANSFER AGENT
2.1 The Fund hereby constitutes and appoints the Transfer Agent as
transfer agent of all the Shares of the Fund and as dividend disbursing agent
for the Fund during the term of this Agreement.
2.2 The Transfer Agent hereby accepts appointment as transfer agent and
dividend disbursing agent and agrees to perform the duties hereinafter set
forth.
Page 2
<PAGE>
2.3. In connection with such appointment, upon or prior to executing this
Agreement, the Fund shall deliver to the Transfer Agent such of the following as
have not already been furnished to the Transfer Agent:
(a) A copy of the Articles of Incorporation of the Fund and all amendments
thereto certified by the Secretary of the Fund;
(b) A copy of the By-Laws of the Fund certified by the Secretary of the
Fund;
(c) A copy of resolutions of the Board of Directors of the Fund, certified
by the Secretary of the Fund, authorizing the execution of this Transfer Agency
Agreement;
(d) A Certificate signed by the Secretary of the Fund specifying the names
and specimen signatures of the Officers of the Fund;
(e) Specimen Share certificates for Shares of each series of the Fund in
the form approved by the Board of Directors of the Fund, together with a
certificate signed by the Secretary of the Fund as to such approval;
(f) Copies of the most recently filed Post-Effective Amendment to the
Fund's Registration Statement, filed with the Securities and Exchange Commission
under the Securities Act of 1933, as amended, and under the Investment Company
Act of 1940, as amended, together with any applications for exemptive relief
from any of the provisions of such laws filed by the Fund and the record of any
formal action of the Securities and Exchange Commission with respect to all such
applications; and
(g) Opinion of Counsel for the Fund to the effect that (1) beneficial
interest in each Fund is divided into an unlimited number of shares of
beneficial interest, (2) the issue and sale of the Fund's authorized but
unissued Shares have been duly authorized under Maryland law, (3) the
outstanding Shares are fully paid and non-assessable and (4) upon the issue and
sale of any authorized and unissued Shares and upon receipt of the authorized
consideration therefor in an amount not less than either the Shares' net asset
value or par value, if any, established and in force at the time of their sale,
the Fund Shares so issued will be validly issued, fully paid and non-assessable.
2.4. The Fund shall either (a) furnish the Transfer Agent with sufficient
supplies of blank share certificates in the form approved from time to time by
the Board of Directors of the Fund, and from time to time will renew such
supplies upon request of the Transfer Agent, or (b) authorize the Transfer Agent
to itself create laser-printed Share certificates in the form approved by the
Board of Directors of the Fund. Any such blank Share certificates shall be
properly signed, by facsimile or otherwise, by authorized Officers and, if
required, shall bear the seal of the Fund or a facsimile thereof.
Notwithstanding the death, resignation or removal of any Officer authorized to
sign such Share certificates, the Transfer Agent may continue to countersign and
issue Share certificates bearing such Officer's signature until otherwise
directed by the Fund. The Fund agrees to indemnify and exonerate, save and hold
the Transfer Agent harmless, from and against any and all claims or demands that
may be asserted against the Transfer Agent with respect to the genuineness of
any Share certificate supplied to the Transfer Agent by the Fund pursuant to
this Agreement.
Page 3
<PAGE>
ARTICLE 3
AUTHORIZATION AND ISSUANCE OF SHARES
3.1. The Transfer Agent shall maintain records of accounts evidencing
ownership of Shares as provided in this Agreement and in the Fund's Prospectus
and, subject to the terms and conditions of this Agreement, when requested shall
countersign, record, issue, and deliver certificates for Shares both upon
original issue and transfer. Evidence of the ownership of Shares shall be
maintained on the Transfer Agent's records in book (uncertificated) form, or, if
requested by an Approved Institution (or the Distributor or its agent acting on
behalf of such Approved Institution) or shareholder, share certificates shall be
issued, subject to the provisions of Article 5 hereof, to evidence the ownership
of Shares.
3.2. Prior to the issuance of any Shares pursuant to Share splits and
prior to any reduction in the number of Shares outstanding, the Fund shall
deliver the following documents to the Transfer Agent:
(a) A copy of the resolution(s) adopted by the Board of Directors of the
Fund and/or the shareholders of the relevant Fund, certified by the Secretary of
the Fund, authorizing such issuance of additional Shares of such Fund or such
reduction, as the case may be;
(b) In the case of the issuance of Shares, an opinion of counsel for the
Fund with respect to matters set forth in Section 2.3(g) hereof as to such
shares; and
(c) Such additional documents as the Transfer Agent may reasonably
request.
ARTICLE 4
RECAPITALIZATION OR CAPITAL ADJUSTMENT
4.1. In the case of any Share split, recapitalization or other capital
adjustment, the Transfer Agent will, in the case of accounts represented by
uncertificated Shares, cause the account records to be adjusted, as necessary,
to reflect the number of Shares held for the account of each such shareholder as
a result of such adjustment, or, in the case of Shares represented by
certificates, will, if so instructed by the Fund, issue revised Share
certificates in exchange for, or upon transfer of, outstanding Share
certificates in the old form, in either case upon receiving:
(a) A Certificate authorizing the issuance of revised Share certificates
and any other action required to be taken by the Transfer Agent in connection
with any such split, recapitalization or other capital adjustment;
(b) A copy of any amendment to the Articles of Incorporation of the Fund,
certified by the Secretary of the Fund, with respect to the adjustment;
(c) Specimen Share certificates in the revised form approved by the Board
of Directors of the Fund;
Page 4
<PAGE>
(d) An opinion of counsel for the Fund with respect to the matters set
forth in Article 2, Section 2.3(g) hereof as to such Shares; and
(e) Such additional documents as the Transfer Agent may reasonably
request.
4.2. The Fund shall either (a) furnish the Transfer Agent with a
sufficient supply of blank Share certificates in any new form authorized in
connection with any such Share split, recapitalization or other capital
adjustment, and from time to time will replenish such supply upon the request of
the Transfer Agent, or (b) authorize the Transfer Agent to itself create laser-
printed Share certificates in the form approved by the Board of Directors of the
Fund. Any such blank Share certificates shall be properly signed by authorized
Officers and, if required, shall bear the Fund's seal or facsimile thereof.
ARTICLE 5
ISSUANCE, REDEMPTION, AND TRANSFER OF SHARES
5.1. (a) On each Business Day, the Transfer Agent shall accept, at such
time as are agreed upon from time to time by the Transfer Agent and the Fund,
(i) purchase orders received by the Transfer Agent directly from an Approved
Institution (or the Distributor or its agent acting on behalf of such Approved
Institution) or an individual investor, (ii) redemption requests either received
from a shareholder, whether or not an Approved Institution (or the Distributor
or its agent acting on behalf of such Approved Institution), or contained in a
Certificate, and (iii) requests for exchanges of the Fund's Shares of a given
class for Shares of another fund received from a shareholder, whether or not an
Approved Institution (or the Distributor or its agent acting on behalf of such
Approved Institution), or contained in a Certificate, provided that (1) such
purchase order, exchange request or redemption request, as the case may be, is
in conformity with the Fund's purchase, exchange, and redemption procedures, as
applicable, described in the Prospectus, and (2) if such type of purchase order,
exchange request, or redemption request is not described in the Prospectus in
effect upon the commencement date of the Agreement, the Transfer Agent has
agreed to accept and act as to such order or request. Upon receipt on any
Business Day of any check drawn or endorsed to the Transfer Agent, the Fund or
the Distributor for the purchase of Shares, or any payment made by Automated
Clearing House or Federal Funds wire, the Transfer Agent shall deposit such
check or payment in the bank account established by the Fund or the Distributor
for the collection of such amounts and shall wire such amounts to the Fund's
Custodian on the next Business Day. The Transfer Agent shall have no
responsibility hereunder for the Fund's compliance with states securities
registration laws ("Blue Sky laws") relating to such purchase orders, except to
the extent that the Transfer Agent will maintain records in a manner that will
enable the Fund to monitor the total number of Shares of the Fund sold in each
state and shall provide the Fund reports as to such sales as specified in
Appendix B to this Agreement.
(b) On each Business Day, the Transfer Agent shall also accept, at
such times as are agreed upon from time to time by the Transfer Agent and the
Fund, a Computer Tape consistent in all respects with the Transfer Agent's tape
layout package, as amended from time to time, which is believed by the Transfer
Agent to be furnished by or on behalf of any Approved Institution, setting forth
data as to purchases, redemptions and exchanges of Shares irrespective of
whether payment of the purchase price accompanies such computer tape. The
Transfer Agent may rely on the data on such Computer Tapes as
Page 5
<PAGE>
accurate, and shall not be responsible hereunder for errors in such Computer
Tapes furnished to it hereunder, unless caused by the Transfer Agent's own
negligence, bad faith or willful misconduct.
(c) On each Business Day, the Fund shall provide or cause to be
provided to the Transfer Agent, at such time as the parties hereto shall agree,
the net asset value per share for the Fund and such other information as the
Transfer Agent may reasonably request.
5.2. On the Business Day following each Business Day, at such time as the
Transfer Agent and the Fund shall agree, an authorized employee of the Transfer
Agent shall confirm the following information by summary sheet transmitted by
electronic or other electromagnetic means to an authorized employee or agent of
the Fund (or by such other form as shall be agreed upon from time to time by the
Fund and the Transfer Agent):
(a) The total dollar amount to be applied toward the purchase of
Shares of the Fund and the number of Shares of the Fund purchased on such prior
Business Day, computed by aggregating the amounts so specified in (i) the
purchase orders received by the Transfer Agent on such prior Business Day from
individual investors and (ii) all Computer Tapes described in Section 5.1(b)
timely received by the Transfer Agent with respect to such prior Business Day;
(b) The total dollar value and number of Shares of the Fund redeemed
on such prior Business Day, computed by aggregating the amounts so specified in
(i) the redemption requests received by the Transfer Agent directly on the
preceding Business Day from shareholders, and (ii) all Computer Tapes described
in Section 5.1(b) relating to such prior Business Day; and
(c) The total dollar value and number of Shares of the Fund to be
exchanged for Shares of another fund and the number of Shares of such other fund
to be issued in such exchanges on such prior Business Day, and the total dollar
value and number of shares of the Fund to be issued in exchange for shares of
another fund on such prior business day (if not included in 5.2(a) above)
computed by aggregating the amounts represented by any exchange requests
received directly by the Transfer Agent from shareholders and the amounts
specified in all Computer Tapes described in Section 5.1(b) relating to such
prior Business Day.
5.3. Following each Business Day, the Transfer Agent will (on a day on
which banks in Denver, Colorado, Chicago, Illinois and New York, New York are
open for business but in any event on or prior to the Fifth Business Day
following such Business Day) advise the Distributor of the amount of cash
necessary to be wired to the Custodian, representing purchase orders for
appropriate Fund's Shares received by the Transfer Agent as to such Business
Day, as set forth in Section 5.1 above. As to each Business Day, the Transfer
Agent will advise the Fund of the amount of cash representing exchange orders
received by the Transfer Agent as to such Business Day, such advice to be given
on the next Business Day.
5.4. As to each Business Day, the Transfer Agent shall issue to, and redeem
from, the accounts specified in a purchase order, redemption request, or
exchange request received by the Transfer Agent in proper form in accordance
with the Prospectus and, when required by the Prospectus, properly endorsed by
the record owner thereof with the record owner's or owners' signature(s)
guaranteed by a U.S. commercial bank or U.S. trust company, a member of a
national securities exchange, a foreign
Page 6
<PAGE>
bank with a U.S. correspondent bank or a federally-chartered savings and loan
association, or shall issue to, and/or redeem from, the accounts specified in a
Computer Tape received by the Transfer Agent from an Approved Institution, the
appropriate number of full and fractional Shares based on the net asset value
per Share of the relevant series of the relevant Funds specified in an advice
received as to such Business Day from the Fund. Notwithstanding the foregoing,
if a redemption specified in a redemption request received directly by the
Transfer Agent or in a Computer Tape is for a dollar value of Shares in excess
of the dollar value of uncertificated Shares in the specified account plus the
dollar value of certificated Shares in the specified account for which the
Transfer Agent has received the tender of a Share certificate or certificates in
proper form as described above, the Transfer Agent shall not effect such
redemption in whole or part. In such case involving a Computer Tape, the
Transfer Agent shall orally or by electronic or other electromagnetic means
advise both the Fund and the Approved Institution (or the Distributor or its
agent if acting on behalf of such Approved Institution) which supplied such
Computer Tape of such discrepancy. In such case involving a direct shareholder,
the Transfer Agent shall, within five (5) business days, notify such shareholder
directly, orally or in writing.
5.5. The Transfer Agent shall, as of each Business Day specified in a
Certificate described in Section 6.1, issue Shares of the Fund, based on the net
asset value per Share of the Fund specified in an advice received from the Fund
to such Business Day, in connection with a reinvestment of a dividend or
distribution on Shares of the Fund.
5.6. On each Business Day, the Transfer Agent shall advise the Fund by
computer/electromagnetic tape specifying, with respect to the immediately
preceding Business Day: the total number of Shares of the Fund (including
fractional Shares) issued and outstanding at the opening of business on such
day; the total number of Shares of the Fund sold on such day, pursuant to
Section 5.2; the total number of Shares of the Fund redeemed or exchanged on
such day; the total number of Shares of the Fund, if any, sold on such day
pursuant to preceding Section 5.4, and the total number of Shares of the Fund
issued and outstanding at the close of business on such day. Unless the Fund or
its agent shall advise the Transfer Agent of any error in the information
contained in such computer/electromagnetic tape (the "Initial Tape") prior to
the transmission of the next computer/electromagnetic tape by the Transfer
Agent, the Transfer Agent shall be deemed to have fulfilled its responsibilities
hereunder with respect to the accuracy of the data on subsequent
computer/electromagnetic tapes submitted to the Fund that are based, in whole or
in part upon any inaccurate data from the Initial Tape.
5.7. In connection with each purchase, exchange and redemption of Shares
other than pursuant to a Computer Tape submitted by an Approved Institution (or
by the Distributor or its agent acting on behalf of such Approved Institution),
the Transfer Agent shall send to the shareholder such statements as are
described in the Prospectus or as otherwise reasonably instructed in writing by
the Funds. If the Prospectus indicates that certificates for Shares are
available, and if specifically requested in writing by any shareholder, or if
otherwise required hereunder, the Transfer Agent will countersign, issue and
mail to such shareholder, at the address set forth in the records of the
Transfer Agent, a Share certificate for any full Shares requested.
5.8. In computing the redemption proceeds to be paid to any shareholder or
to an account for an Approved Institution, the Transfer Agent shall first
compute the amount of any withholding for federal income taxes for which the
Transfer Agent has the responsibility under this Agreement to calculate such
Page 7
<PAGE>
withholding, in such manner as the Fund and the Transfer Agent shall agree from
time to time in conformity with instructions provided by the Fund to the
Transfer Agent. The Transfer Agent shall also compute any withholding for
federal income taxes for which the Transfer Agent has such responsibility at the
time of any exchange of a Fund's shares for another fund's shares. In the case
of a redemption of Shares directly by a shareholder of record and not by means
of a Computer Tape submitted by an Approved Institution (or by the Distributor
or its agent acting on behalf of such Approved Institution), upon deposit of
moneys in a redemption account by the relevant Custodian against which the
Transfer Agent is authorized by the Fund to draw checks in connection with a
redemption of Shares of the Fund, the Transfer Agent shall cancel the redeemed
Shares and after making appropriate deduction for any withholding of taxes
required of it by this Agreement or applicable law, make payment of (i) the
redemption proceeds to the order of the shareholder, and (ii) any tax withheld
to the Internal Revenue Service, in accordance with the Fund's redemption and
payment procedures described in the Prospectus or as otherwise reasonably
described in a written instruction from the Fund. In the case of an exchange of
Shares directly by a shareholder of record and not by means of a Computer Tape
submitted by an Approved Institution (or the Distributor or its agent acting on
behalf of such Approved Institution), upon deposit of moneys in an account by
the relevant Custodian against which the Transfer Agent is authorized by the
Fund to draw checks in connection with an exchange of Shares of a fund, the
Transfer Agent shall cancel the exchanged Shares, and withhold and pay taxes
required under this Agreement and applicable law. In the case of a redemption
of Shares pursuant to a Computer Tape, the Transfer Agent shall, on the next
Business Day, send the Fund a Computer Tape setting forth the amount of
redemption proceeds due each Approved Institution. If such Approved Institution
(or the Distributor or its agent acting on behalf of such Approved Institution)
has previously furnished the Transfer Agent withholding instructions with
respect to such redemption or any exchange of Shares pursuant to a Computer
Tape, the Transfer Agent shall include in the Computer Tape furnished to the
Fund information as to the amount of such withholding.
5.9. The Transfer Agent shall not be required to issue Shares of any fund
(other than with respect to the reinvestment of dividends or distributions on
shares owned by an existing shareholder if so stated in the Certificate) after
it has received a Certificate stating that the sale of Shares of that fund has
been suspended or discontinued.
5.10. The Transfer Agent shall not be responsible for the payment of any
original issue or other taxes required to be paid by the Fund in connection with
the issuance of any Shares.
5.11. The Transfer Agent shall not be responsible for issuing or effecting
any "stop transfer" or other similar order or restrictions on any Shares held in
the name of an Approved Institution. In the case of Shares registered in the
name of a shareholder other than an Approved Institution as to which a "stop
transfer" or other similar order or restriction applies, the Transfer Agent will
adhere to the terms of such stop transfer or similar order, except that it may
rely on a Certificate to effect a redemption, exchange or transfer of such
Shares, notwithstanding such stop order or restriction.
5.12. The Transfer Agent shall accept (a) a Computer Tape which is
furnished by or on behalf of any Approved Institution (or the Distributor or its
agent acting on behalf of such Approved Institution) and represented to be
instructions with respect to the transfer of Shares from one account of such
Approved Institution to another such account, and (b) as to Shares standing
directly in the name of a shareholder other than an Approved Institution,
transfer instructions in proper form in accordance with
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the Fund's Prospectus and the Transfer Agent's rules described herein, and shall
effect the transfer specified in said Computer Tape or transfer instructions,
provided that any necessary documents or Share certificates have been tendered
to the Transfer Agent.
5.13. (a) Except as otherwise provided in sub-paragraph (b) of this
Section 5.13 and in Section 5.14, Shares will be transferred, exchanged or
redeemed other than pursuant to Computer Tapes from an Approved Institution (or
the Distributor on its agent acting on behalf of such Approved Institution) upon
presentation to the Transfer Agent of endorsed Share certificates or, in the
case of uncertificated Shares, instructions endorsed in proper form in
accordance with the Prospectus as stated in Section 5.4, accompanied by such
documents as the Transfer Agent reasonably deems necessary to evidence the
authority of the person making such transfer, exchange or redemption, and
bearing satisfactory evidence of the payment of transfer taxes. In the case of
small estates, where no administration is contemplated, the Transfer Agent may,
when furnished with an appropriate small estates affidavit under applicable law
or with a surety bond, and without further approval of the Fund, transfer or
redeem Shares registered in the name of a decedent if the current market value
of the Shares being redeemed or transferred does not exceed such amount as may
from time to time be prescribed by the applicable state statutes and
regulations. The Transfer Agent reserves the right to refuse to transfer,
exchange or redeem Shares until it is reasonably satisfied that the endorsement
on the Share certificate or instructions is valid and genuine, and for that
purpose it will require, unless otherwise instructed by an Officer, a signature
guarantee as stated in Section 5.4 of this Agreement. The Transfer Agent also
reserves the right to refuse to transfer, exchange or redeem Shares until it is
reasonably satisfied that the requested transfer, exchange or redemption is
legally authorized, or until it is reasonably satisfied that there is no basis
to any claims adverse to such transfer, exchange or redemption. The Transfer
Agent may, in effecting transfers, exchanges and redemptions of Shares, rely
upon those provisions of the Uniform Act for the Simplification of Fiduciary
Security Transfers or the Uniform Commercial Code, as the same may be amended
from time to time, applicable to the transfer of securities.
(b) Notwithstanding the foregoing or any other provision contained
in this Agreement to the contrary, the Transfer Agent shall be fully protected
by the Fund in requiring any instructions, documents, assurances, endorsements
or guarantees, including, without limitation, any signature guarantees, in
connection with a redemption, exchange or transfer of Shares whenever the
Transfer Agent reasonably believes that requiring the same would be consistent
with the transfer, exchange and redemption procedures described in the
Prospectus, or in any instructions or certificates provided to the Transfer
Agent by the Fund.
5.14. Notwithstanding any provision contained in this Agreement to the
contrary, the Transfer Agent shall not be expected to require, as a condition to
any transfer, redemption or exchange of any Shares pursuant to a Computer Tape,
any documents, including, without limitation, any documents of the kind
described in Section 5.13(a) to evidence the authority of the person requesting
the transfer, exchange or redemption and/or the payment of any transfer taxes,
and shall be fully protected in acting in accordance with the applicable
provisions of this Agreement.
5.15. Nothing contained in this Agreement shall constitute any agreement
or representation by the Transfer Agent to permit, or to agree to permit, any
Approved Institution to input information into the System, although the Transfer
Agent may, with the Fund's written permission, permit access to the
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System by an Approved Institution to retrieve data or information as to such
Approved Institution's accounts.
ARTICLE 6
DIVIDENDS AND DISTRIBUTIONS
6.1. The Fund shall furnish to the Transfer Agent a Certificate either (i)
setting forth with respect to each series of the Fund the date of the
declaration of a dividend or distribution, the date of accrual or payment
thereof, as the case may be, the record date as of which shareholders entitled
to payment or accrual, as the case may be, shall be determined, the amount per
Share of such dividend or distribution for each series of the Fund, the payment
date on which all previously accrued and unpaid dividends are to be paid, and
the total amount, if any, payable by the Transfer Agent with respect to such
dividend or distribution on such payment date, or (ii) stating that the
declaration of dividends and distributions shall be on a daily or other periodic
basis and containing information of the type set forth in subsection (i) hereof.
6.2. Upon the payment date specified in the relevant Certificate, the
Transfer Agent shall, in the case of a cash dividend or distribution, advise the
Fund (by telephone or other electronic transmission) of the amount of cash
necessary to make the payment of the dividend or distribution to the
shareholders of record as of such payment date, including the amounts to be paid
to Approved Institutions. The Fund shall be responsible for having the
appropriate Custodian transfer a sufficient amount of cash to a dividend
disbursement account maintained by the Fund for the relevant Series against
which the Transfer Agent shall cause checks, ACH or federal funds wire payment
to be drawn to the order of such shareholders or Approved Institutions in
payment of the dividend. The Transfer Agent shall not be liable for any
improper payments made in accordance with a Certificate described in Section
6.1. If the Transfer Agent shall not receive from the appropriate Custodian
sufficient cash to make payments of any cash dividend or distribution to
shareholders of the Fund as of the record date, the Transfer Agent shall, upon
notifying the Fund, withhold payment to all shareholders of record as of the
record date until sufficient cash is provided to the Transfer Agent unless
otherwise instructed by the Fund by a Certificate and acceptable to the Transfer
Agent. In the case of dividends or distributions reinvested in additional
Shares of a series of the Fund, the Transfer Agent shall follow the procedures
set forth in Section 5.5.
6.3. The Transfer Agent shall in no way be responsible for the
determination of the rate or form of dividends or capital gain distributions due
shareholders.
6.4. The Transfer Agent shall, upon request of the Fund, file such
appropriate information returns concerning the payment of dividends and capital
gain distributions and redemptions with the proper Federal, state and local
authorities as are required by law to be filed by the Fund but shall in no way
be responsible for the collection or withholding of taxes due on such dividends
or distributions or on redemption proceeds due shareholders, except and only to
the extent required of it by applicable law for accounts of shareholders other
than Approved Institutions. If any amount is to be withheld from any dividend
or distribution paid to, or exchange or redemption proceeds or other cash
distribution from, the account of an Approved Institution, such Approved
Institution (or the Distributor or its agent acting on behalf of such Approved
Institution) may advise the Transfer Agent of the amount to be withheld
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therefrom, and if such advice is provided in a timely manner to the Transfer
Agent, the Transfer Agent will provide a separate check for such amount to the
Approved Institution, which shall be responsible for the proper application of
such withheld amounts.
ARTICLE 7
CONCERNING THE FUND
7.1. The Fund shall promptly deliver to the Transfer Agent written notice
of any change in the Officers authorized to sign or give Share certificates or
Certificates, together with a specimen signature of each new Officer.
7.2. It shall be the sole responsibility of the Fund to deliver to the
Transfer Agent in a timely manner the Fund's currently effective Prospectus,
copies of any exemptive relief obtained by the Fund under applicable securities
laws and copies of any amendments to the Fund; Articles of Incorporation, By-
Laws and any other documents to be furnished by the Fund under this Agreement to
enable the Transfer Agent to carry out its duties hereunder, and, for purposes
of this Agreement, the Transfer Agent shall not be deemed to have notice of any
information contained in such Prospectus, exemptive relief or other document
until it is actually received by the Transfer Agent.
ARTICLE 8
CONCERNING THE TRANSFER AGENT
8.1. Subject to the standard of care set forth in Section 8.4, the Transfer
Agent shall not be liable and shall be fully protected in acting upon any
Computer Tape, Certificate, oral instructions, writing or document reasonably
believed by it to be genuine and to have been signed (in the case of written
instructions or documents) or made by the proper person or persons and shall not
be held to have any notice of any change of authority of any person until
receipt of written notice thereof from the Fund or such person. Subject to the
standard of care set forth in Section 8.4, the Transfer Agent shall be similarly
protected in processing Share certificates which it reasonably believes to bear
the proper manual or facsimile signatures of the Officers of the Fund and the
proper countersignature of the Transfer Agent or any prior transfer agent.
8.2. The Transfer Agent covenants that it shall carry out its
responsibilities under this Agreement in accordance and compliance with the
provisions of applicable laws and regulations governing its operation as a
transfer agent.
8.3. The Transfer Agent shall keep and maintain on behalf of the Fund such
records which the Fund or the Transfer Agent is, or may be, required to keep and
maintain pursuant to any applicable statutes, rules and regulations, including
without limitation Rule 31a-1 under the Investment Company Act of 1940, relating
to the maintenance of records in connection with the services to be provided
hereunder. The Transfer Agent agrees to make such records available for
inspection by the Fund at reasonable times and otherwise to keep confidential
all records and other information relative to the Fund and its shareholders,
except when the Transfer Agent reasonably believes it has been requested to
divulge
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such information by duly-constituted authorities or court process, or requested
by a shareholder with respect to information concerning an account as to which
such shareholder has either a legal or beneficial interest or when requested by
the Fund, the shareholder, or the dealer of record as to such account.
8.4 (a) The Transfer Agent shall not be liable for any loss or damage,
including, without limitation, attorneys' fees, expenses and court costs,
resulting from the Transfer Agent's actions or omissions to act under or in
connection with this Agreement and its duties and responsibilities hereunder,
except for any loss or damage arising out of its own failure to act in good
faith, or its negligence or willful misfeasance.
(b) The Transfer Agent shall, provided such coverage is readily
available to the Transfer Agent at reasonable rates and upon reasonable terms
and conditions, maintain an insurance policy or surety bond, in the face amount
of $10 million per covered transaction against losses suffered by the Transfer
Agent in excess of the policy deductibles arising from errors or omission on the
part of the Transfer Agent in carrying out its responsibilities under this
Agreement and other agreements. The Transfer Agent shall upon request, furnish
promptly to the Fund copies of all insurance policies maintained pursuant to
this Section 8.4(b) that have not previously been furnished to the Fund.
(c) Any costs or losses incurred by the Fund for the processing of
any purchase, redemption, exchange or other share transactions at a price per
share other than the price per share applicable to the effective date of the
transaction (the foregoing being generally referred to herein as "as of"
transactions) will be handled in the following manner:
1. For each calendar year, if all "as of" transactions for the year
resulting from the actions or inactions of the Transfer Agent,
taken in the aggregate, result in a net loss to the Fund ("net
loss"), Transfer Agent will reimburse the Fund for such net loss,
except to the extent that such net loss may be offset by
application of a "net benefit" to the Fund carried over from
prior calendar years pursuant to sub-paragraph 2 immediately
below.
2. For each calendar year, if all "as of" transactions for the year
resulting from the actions or inactions of the Transfer Agent,
taken in the aggregate, result in a net benefit to the Fund ("net
benefit"), the Fund shall not reimburse the Transfer Agent for
the amount of such net benefit; however, any "net benefit" for
any calendar year may be used to offset, in whole or in part, any
"net loss" suffered by the Fund in any future calendar year so as
to reduce the amount by which the Transfer Agent shall be
required to reimburse the Fund for such "net loss" in such year
pursuant to sub-paragraph 1 immediately above.
3. Any "net loss" for which the Transfer Agent reimburses the Fund
in any calendar year shall not be carried over into future years
so as to offset any "net benefit" in such future years.
8.5 The Fund shall indemnify and exonerate, save and hold harmless the
Transfer Agent and its officers, directors, employees and agents (hereinafter
the Transfer Agent and such persons are referred to as "Indemnitees") from and
against any and all liabilities or losses arising from claims or
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demands (whether with or without basis in fact or law), and from any and all
expenses (including, without limitation, reasonable attorney's fees, expenses
and court costs associated with defending against such claims and demands,) of
any nature which any Indemnitee may sustain or incur or which may be asserted
against any Indemnitee by any person arising out of or in any manner related to
any action taken or omitted to be taken by the Transfer Agent in good faith and
without negligence or willful misconduct in reasonable reliance upon (i) any
provision of this Agreement; (ii) the Prospectus; (iii) any instruction or order
including, without limitation, any Computer Tape reasonably believed by the
Transfer Agent to have been received from an Approved Institution (or the
Distributor or its agent acting on behalf of such Approved Institution); (iv)
any instrument or order reasonably believed by the Transfer Agent to be genuine
and to be signed, countersigned or executed by any duly authorized Officer, (v)
any Certificate or other instructions of an Officer, (vi) any opinion of legal
counsel for the Fund; (vii) any records or data supplied by the Fund's prior
transfer agent; or (viii) any order of any court, arbitration panel or other
judicial entity.
8.6. At any time the Transfer Agent may apply to an Officer of the Fund for
written instructions with respect to any matters arising in connection with the
Transfer Agent's duties and obligations under this Agreement, and the Transfer
Agent shall not be liable for any action taken or omitted by it in good faith
and without negligence or willful misconduct in accordance with such written
instructions. The Transfer Agent may consult with counsel to the Fund, at the
expense of the Fund and shall be fully protected with respect to anything done
or omitted by it in good faith and without negligence or willful misfeasance in
accordance with the advice or opinion of counsel to the Fund. Such application
by the Transfer Agent for written instructions from an Officer of the Fund may,
at the option of the Transfer Agent, set forth in writing any action proposed to
be taken or omitted by the Transfer Agent with respect to its duties or
obligations under this Agreement and the date on and/or after which such action
shall be taken, and the Transfer Agent shall not be liable (other than for its
bad faith, negligence or willful misfeasance) for any action taken or omitted in
accordance with a proposal included in any such application on or after the date
specified therein unless, prior to taking or omitting any such action, the
Transfer Agent has received written instructions in response to such application
specifying the action to be taken or omitted.
8.7. Any report, confirmation or other document furnished to the Fund or to
an Approved Institution as part of the Transfer Agent's responsibilities under
this Agreement shall be deemed final and conclusive on the 8th Business Day
after such report, confirmation or document has been furnished to the Fund or
Approved Institution, as the case may be, and the Transfer Agent shall not be
liable to the Fund or such Approved Institution under this Agreement as to any
error or omission in such report, confirmation or document that is not reported
to the Transfer Agent within such 7-day period.
8.8. The Transfer Agent shall deliver Share certificates by courier or by
certified or registered mail to the shareholder's address in the records of the
Transfer Agent. The Transfer Agent shall advise the Fund of any Share
certificates returned as undeliverable after being transmitted by courier or
mailed as herein provided for.
8.9. The Transfer Agent may issue new Share certificates in place of Share
certificates represented to have been lost, stolen, or destroyed upon receiving
instructions satisfactory to the Transfer Agent. If the Transfer Agent receives
written notification from the owner of the lost, destroyed, or stolen Share
certificate within a reasonable time after the owner has notice of such loss,
destruction or
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theft, the Transfer Agent shall issue a replacement Share certificate upon
receipt of an affidavit or affidavits of loss or nonreceipt and an indemnity
agreement executed by the registered owner or his legal representative, and
supported (a) in the case of a certificate having a value at the time of
replacement of less than $100, by a fixed penalty surety bond for twice the
then-current market value of Shares represented by said certificate and (b) in
the case of a certificate having a value at time of replacement of $100 or more,
by an open penalty bond, in form satisfactory to the Transfer Agent or (c) by
such other documentation or reasonable assurances in a particular case as may be
set forth in a Certificate. If the Fund receives such written notification from
the owner of the lost, destroyed or stolen Share certificate within a reasonable
time after the owner has notice of it, the Fund shall promptly notify the
Transfer Agent. The Transfer Agent may issue new Share certificates in exchange
for, and upon surrender of, mutilated Share certificates.
8.10. The Transfer Agent will supply shareholder lists to the Fund from
time to time upon receiving a request therefor from an Officer of the Fund.
8.11. At the request of an Officer, the Transfer Agent will address and
mail such appropriate notices to shareholders as to the Fund may direct, at the
Fund's expense.
8.12. Notwithstanding any of the foregoing provisions of this Agreement,
the Transfer Agent shall be under no duty or obligation to inquire into, and
shall not be liable for:
(a) The legality of the issue or sale of any Shares, the sufficiency
of the amount to be received therefor, or the authority of an Approved
Institution or of the Fund, as the case may be, to request such sale or
issuance;
(b) The legality of a transfer, exchange or of a redemption of any
Shares by an Approved Institution, the propriety of the amount to be paid
therefor, or the authority of an Approved Institution to request such transfer,
exchange or redemption;
(c) The legality of the declaration of any dividend or capital gains
distribution by the Fund, or the legality of the issue of any Shares in payment
of any Share dividend or distribution; or
(d) The legality of any recapitalization or readjustment of the
Shares.
8.13. The Transfer Agent shall be entitled to receive, and the Fund hereby
agrees to pay to the Transfer Agent for its performance hereunder, including its
performance of the duties and functions set forth in Appendix B hereto, (i) its
reasonable out-of-pocket expenses (including without limitation legal expenses,
court costs, and attorney's fees associated with litigation or arbitration)
incurred in connection with this Agreement and its performance hereunder and
(ii) such compensation as is specified in Appendix C hereto as such fees may be
amended from time to time by agreement in writing by the Transfer Agent and the
Fund.
8.14. The Transfer Agent shall have no duties or responsibilities
whatsoever except such duties and responsibilities as are specifically set forth
in this Agreement, and no covenant or obligation shall be implied in this
Agreement against the Transfer Agent.
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8.15. The Transfer Agent shall indemnify and exonerate, save and hold
harmless the Fund, and its officers, directors, employees and agents, from and
against any and all liabilities or losses arising from claims and demands
(whether with or without basis in fact or law), and from any and all expenses
(including, without limitation, reasonable attorney's fees, expenses and court
costs), of any nature which the Fund or any officer, director, employee or agent
may sustain or incur or which may be asserted against them by any person arising
out of or in any manner related to the Transfer Agent's failure to comply with
the terms of this Agreement or which arise out of the Transfer Agent's
negligence or willful misconduct provided, however, that the Transfer Agent
shall not indemnify and exonerate, save and hold harmless, the Fund, its
officers, directors, employees, and agents for anything arising out of or in any
manner related to the Fund's failure to comply with the terms of this Agreement
or which arises out of the Fund's, or any officer's, director's, employee's or
agent's (other than the Transfer Agent) negligence or willful misconduct or the
Transfer Agent's reliance on information or instructions received from, or
issued on behalf of, the Fund.
ARTICLE 9
TERMINATION
9.1. The initial term of this Agreement shall commence on the Effective
Date and shall continue through June 5, 1998 (the "Initial Term") unless earlier
terminated pursuant to Section 9.2. Thereafter, this Agreement shall continue
from day to day thereafter (such period shall be referred to as the "Renewal
Term"), until either of the parties hereto terminates this Agreement by giving
at least 30 days prior written notice to the other party, whereupon this
Agreement shall terminate automatically upon the earlier of the expiration of
the 30 day period specified in the written notice or on August 1, 1998. For
every business day which the Agreement continues past June 30, 1998, the Fund
shall pay to the Transfer Agent a daily processing fee of $5,000. This daily
processing fee is in addition to any other fees payable under this Agreement and
it is agreed by the Fund and the transfer Agent that this daily processing fee
is not a penalty but is a reasonable estimate of the expenses that would be
incurred by the Transfer Agent in continuing to offer the Fund the services
provided for under this Agreement. In no event shall the term of this
Agreement, including any "Renewal Term" continue past August 1, 1998. In the
event such notice of termination is given by the Fund, it shall be accompanied
by a copy of a resolution of the Board of Directors of the Fund, certified by
the Secretary or any Assistant Secretary, electing to terminate this Agreement.
In the event such notice is given by the Transfer Agent, the Fund shall, on or
before the termination date, deliver to the Transfer Agent a copy of a
resolution of its Board of Directors certified by the Secretary or any Assistant
Secretary designating a successor transfer agent or transfer agents. In the
absence of such designation by the Fund, the Transfer Agent may designate a
successor transfer agent. If the Fund fails to designate a successor transfer
agent, the Fund shall, upon the date specified for termination of this Agreement
and delivery of the records maintained hereunder, be deemed to be its own
transfer agent and the Transfer Agent shall thereby be relieved of all duties
and responsibilities pursuant to this Agreement.
9.2 Notwithstanding Section 9.1 hereof, this Agreement may be terminated
at any time by the Fund upon not less than 60 days' written notice from the Fund
to the Transfer Agent notifying the Transfer Agent: (i) if a majority of the
Directors who are not "interested persons" (as that term is defined in the
Investment Company Act of 1940) upon completion of the procedures set forth
below have reasonably made a specific finding that the Transfer Agent has failed
on a continuing basis to perform
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its duties pursuant to this Agreement in a satisfactory manner consistent with
then current industry standards and practices or (ii) if there is instituted or
pending an action or proceeding by or before any court or governmental,
administrative or regulatory agency against or involving the parties hereto,
their affiliates, the Directors of the Fund or any of them and challenging the
making of this Agreement or alleging that any material term of the Agreement is
contrary to law or any governmental agency has threatened in writing to commence
such an action or proceeding. Prior to any termination pursuant to clause (i),
the Board of Directors of the Fund shall provide the Transfer Agent with a
written statement of the specific aspects of the Transfer Agent's performance of
its duties that are unsatisfactory, the specific incident or incidents giving
rise to the Board of Directors' conclusion and any written material that the
Board of Directors' relied upon in making such a determination. The Transfer
Agent shall have 30 days to respond to such written statement. If no response is
made, or if, after reasonable consideration of the response of the Transfer
Agent, such response is unsatisfactory to the Board of Directors, then the Board
of Directors of the Fund may terminate the Agreement pursuant to clause (i)
thereof. For purposes of making a finding as contemplated by clause (i) above,
the Transfer Agent shall be, absent unusual circumstances, conclusively presumed
to have failed on a continuing basis to perform its duties pursuant to this
Agreement in a satisfactory manner consistent with the industry standards and
practices prevailing on the date of this Agreement if any of the following
should occur:
(1) The Transfer Agent through its fault is unable (more than once in
a twelve-month period) to process daily activity for any two successive Business
Days and to confirm information generated by such activity by the fourth
Business Day following the later of such two Business Days. (For example,
assuming no holidays, daily activity on a Monday and Tuesday is not confirmed by
the following Monday.)
(2) The Transfer Agent through its fault is unable (more than two
times in any twelve-month period) to provide system access to personnel of an
Approved Institution for six hours between 9:00 a.m. and 5:00 p.m. Chicago time
on three successive Business Days.
(3) The Transfer Agent through its fault is unable (more than twice in
any one year) to create and mail dividend checks within four Business Days after
the Fund's payable date (assuming that the required information has been
furnished to the Transfer Agent on the record date).
(4) The Transfer Agent through its fault is unable to instruct various
financial institutions on daily money movements from and to the Funds'
Custodians for two successive Business Days by the Fourth Business Day following
the later of such two Business Days. (For this purpose, instructions based on
reasonable estimates are treated as fulfilling the Transfer Agent's obligations
hereunder.)
(5) The Transfer Agent through its fault is unable (more than twice in
any twelve-month period) to transmit dividend activity to an Approved
Institution within five Business days from the relevant Fund's payable date.
For purposes of the foregoing, an event described in any of the foregoing
clauses 1 through 5 shall be deemed not to have occurred if the Transfer Agent's
inability to perform is a result, directly or indirectly of faulty or inadequate
performance by service provider including, but not limited to, telephone
companies, pricing services, Nuveen & Co., Approved Institutions, and banks
other than the Transfer
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Agent and its agents and employees or a result, directly or indirectly, of other
events out of the Transfer Agent's reasonable control. Also for the purposes of
the foregoing, if the Transfer Agent processes transactions or instructions (as
the case may be) as required hereunder within the time periods indicated but
more than 10% of the transactions, checks or instructions, as the case may be,
are inaccurate in any material respect, and are not corrected within the
requisite time then the Transfer Agent shall be deemed to have been unable to
perform the relevant service within the requisite time.
9.3. In the event the Fund or the Transfer Agent terminates the Transfer
Agency Agreement at any time, the Fund shall be responsible for the payment of
any and all additional fees and expenses of the Transfer Agent relating to the
conversion to the new Transfer Agent. Included in these expenses will be any
travel/entertainment expenses incurred by the Transfer Agent related to
preparation for the conversion that exceed $2,000 in the aggregate per month.
Upon termination of this Agreement, the Transfer Agent will facilitate transfer
of the records maintained by it hereunder and cooperate with such successor
transfer agent as may be designated pursuant to the provisions of Section 9.1
hereof with respect to delivery of such records and assumption by such successor
transfer agent of its duties. The records will be delivered to the successor
transfer agent in the format in which they are maintained and all shareholder
records currently maintained in the ORIN computer system or on imaging discs
will be delivered in either their current format or at the expense of the Fund
will be converted into another format acceptable to the Fund and Transfer Agent.
The Fund must request the conversion of the imaging files to another acceptable
format on or before January 1, 1998 in order to allow the Transfer Agent
sufficient time to convert the records. If no such request is made on or before
that date, the shareholder records will be delivered in the format in which they
are currently stored by the Transfer Agent. The Fund shall be responsible for
any and all expenses related to the delivery of all records and, if applicable,
the conversion of the shareholder records from their current format to any other
format as elected by the Fund.
Upon termination of the Transfer Agency Agreement, the Transfer Agent shall
assist the Fund in transferring any bank accounts currently existing for the
payment of dividends and distributions or redemption of shares of the Fund to
the successor transfer agent. If the Fund elects not to transfer those
accounts, the Transfer Agent shall maintain the accounts for a period of 12
months from termination of this Agreement and then close the accounts and return
any remaining monies in those accounts to the Fund. The Fund shall be
responsible for keeping sufficient funds in those accounts to clear any
outstanding checks and the Transfer Agent shall have no responsibility for any
checks that do not clear that account for any reason.
Upon the termination of the Transfer Agency Agreement and for a period of three
(3) months thereafter, the Transfer Agent shall identify a specific person to
help interpret records for the Fund or the successor transfer agent. All
requests from the Fund or the successor transfer agent shall be directed to that
person. The Fund shall be responsible for any and all expenses related to such
assistance.
Upon termination of the Transfer Agency Agreement, the Fund and/or the successor
transfer agent shall be responsible for any and all regulatory and/or tax
reporting that may be required for the calendar year during which the
termination of the Agreement occurs. The Transfer Agent will account to the
successor transfer agent or the Fund for any withholding liability accrued for
any taxes withheld during any prior of that year in which it acted as transfer
agent for the Fund, including but not limited to TEFRA.
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ARTICLE 10
ADDITIONAL SERIES
10.1. In the event that the Fund establishes one or more Series in
addition to the Series named herein with respect to which it desires to have the
Transfer Agent render services as transfer agent under the terms hereof, it
shall so notify the Transfer Agent in writing at least 60 days in advance of the
sale of Shares of such Series and shall deliver to the Transfer Agent the
documents listed in Section 2.3 with respect to such Series. Unless the
Transfer Agent declines in writing within a reasonable time to provide such
services, the Shares of such Series shall be subject to this Agreement.
ARTICLE 11
MISCELLANEOUS
11.1. The Fund agrees that prior to effecting any change in the Prospectus
which would increase or alter the duties and obligations of the Transfer Agent
hereunder, it shall advise the Transfer Agent of such proposed change at least
30 days prior to the intended date of the same, and shall proceed with such
change only if it shall have received the written consent of the Transfer Agent
hereto, and shall have received and agreed to the schedule of charges, if any,
specified by the Transfer Agent necessary to effect such change.
11.2. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Fund shall be sufficiently given if addressed
to the Fund and mailed or delivered to it at its office at 333 West Wacker
Drive, Chicago, Illinois 60606, Attention: Mr. Stuart Rogers, or at such other
place as the Fund may from time to time designate in writing.
11.3. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Transfer Agent shall be sufficiently given if
addressed to the Transfer Agent, Attention: President, and mailed or delivered
to it at its office at 6803 South Tucson Way, Englewood, Colorado 80112, with a
copy to be sent to Andrew J. Donohue at OppenheimerFunds, Inc. Two World Trade
Center, New York, NY 10048 or at such other place as the Transfer Agent may from
time to time designate in writing.
11.4. This Agreement may not be amended or modified in any manner except
by a written agreement executed by both parties.
11.5. This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successors and assigns; provided, however, that
this Agreement shall not be assignable by the Fund or the Transfer Agent without
the written consent of the other party. A change of ownership of the Transfer
Agent as a result of an internal reorganization of the Transfer Agent, its
parent corporation or affiliates shall not be deemed to be an "assignment"
hereunder. A change in "control" (as defined under the Investment Company Act
of 1940) of the Transfer Agent's parent corporation shall not be deemed an
"assignment" hereunder. A sale of a controlling interest in the capital stock
or of all or substantially all of the assets of the Transfer Agent to a third
party unaffiliated with the Transfer Agent or its parent corporation shall be
deemed to be an "assignment" hereunder.
Page 18
<PAGE>
11.6. This Agreement shall be governed by and construed in accordance with
the laws of the State of Colorado applicable to agreements to be wholly
performed in that state.
11.7. This Agreement may be executed in any number of counterparts each of
which shall be deemed to be an original; but such counterparts shall, together,
constitute only one instrument.
11.8. The provisions of this Agreement are intended to benefit only the
Transfer Agent and the Fund, and no rights shall be granted to any other person
by virtue of this Agreement.
11.9. Neither the Fund nor the Transfer Agent will be liable or
responsible hereunder for delays or errors by reason of circumstances reasonably
beyond its control, including, without limitation, acts of civil or military
authority, national emergencies, labor difficulties, fire, mechanical breakdown,
flood, catastrophe, acts of God, insurrection, war, riots, or failure of
transportation, communication or power supply.
11.10. The Fund shall establish and maintain such bank accounts, with such
bank or banks as are selected by the Fund, as are necessary so that the Transfer
Agent may perform the services to be provided hereunder. To the extent that
performance of such services shall require the Transfer Agent directly to
disburse amounts for payments of dividends, redemption proceeds or other
purposes, the Fund shall provide such bank or banks with all instructions and
authorizations necessary to evidence the Transfer Agent's authority to effect
such transactions.
Page 19
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers, thereunto duly authorized, as of the day
and year first above written.
Attest: NUVEEN CALIFORNIA TAX-FREE FUND, INC.
/s/ Gifford R. Zimmermen Asst Secy By: /s/ Anna Kucinskis VP
- ------------------------------------- -----------------------------------
Name Title Name Title
Attest: SHAREHOLDER SERVICES, INC.
/s/ Katheryn L. Kluck AVP By: /s/ Barbara Hennigar President
- ------------------------------------- ------------------------------------
Name Title Barbara Hennigar, President
Page 20
<PAGE>
NUVEEN CALIFORNIA TAX-FREE FUND, INC.
TRANSFER AGENCY AGREEMENT
Appendix A
Officer's Certificate
I, ____________________________, the Secretary of NUVEEN CALIFORNIA TAX-
FREE FUND, INC., a Maryland corporation (the "Fund"), do hereby certify that:
The following individuals have been duly authorized by the Directors of the
Fund in conformity with the Fund's Articles of Incorporation and By-Laws to
execute any Certificate, instruction, notice or other instrument, including an
amendment to Appendix B to this Agreement, or to give oral instructions on
behalf of the Fund, and the signatures set forth opposite their respective names
are their true and correct signatures.
NAME TITLE SIGNATURE
- ---- ----- ---------
___________________ Chairman _____________________
___________________ President _____________________
___________________ Secretary _____________________
___________________ Trustee _____________________
___________________ Vice President _____________________
___________________ _______________ _____________________
___________________ _______________ _____________________
___________________ _______________ _____________________
___________________ _______________ _____________________
___________________ _______________ _____________________
___________________ _______________ _____________________
___________________ _______________ _____________________
________________________________, Secretary
Name
Page 21
<PAGE>
NUVEEN CALIFORNIA TAX-FREE FUND, INC.
TRANSFER AGENCY AGREEMENT
Appendix B
Transfer Agent Services
SERVICE: SSI WILL:
- ------- --------
New Account Set-Ups Process new sales applications. Place
telephone calls to account representatives as
needed to clarify instructions for new
account set-ups.
Purchases - New and Subsequent Process mailed-in, lockbox, bank wire, list
billing, ACH, and telephone payments as
received. Coordinate and balance UIT
reinvestment payments.
Transfers Negotiate and process all transfer requests.
Exchanges - Mail and Telephone Negotiate and process exchange requests.
Record telephone exchange requests.
Redemptions - Mail and Telephone Negotiate and process mailed in, ACH and
telephone redemption requests. Record
telephone redemption requests.
Wire Order Purchases and Process wire order purchases and Redemptions
redemptions for designated settlement period accepted on
recorded telephone lines and via NSCC
FUND/SERV. Process purchases and redemptions
for same day wire settlement.
Account Maintenance Process all written and telephone
maintenance. For address changes, prepare
(Address Changes, Dividend and mail a notice of the address change to
Option Changes, Name Changes, the former address.
Broker or Dealer Changes,
etc.)
Certificate Issuances Issue certificates as requested by
shareholders.
Telephone Services Provide efficient handling of all incoming
shareholder and broker/dealer telephone
calls. Make outgoing clarification
calls/coordination with Chase on UIT/ETF
consolidations. Provide timely problem
resolution for all servicing calls. Provide
automated trend reporting.
Page 1
<PAGE>
SERVICE: SSI WILL:
- ------- --------
Correspondence with Shareholders Respond to all shareholder and broker/dealer
and Broker/Dealers written inquiries. Document all
correspondence affecting shareholder accounts
on the Shareholder Accounting System.
Shareholder Confirms Prepare and mail confirmations of daily
(Daily/Monthly/Quarterly/Annual) account activity. Prepare and mail monthly,
quarterly, and annual confirmations as
directed by the fund.
Dealer Confirms Prepare and mail weekly dealer confirmations
listing activity on client accounts as
directed by the Fund.
Distribution Disbursements Prepare and mail cash distribution checks.
Process reinvested distributions.
Commission Statements Provide bimonthly commission statements
listing each purchase and the portion of the
sales charge paid to the broker/dealer.
Commission Checks Provide bimonthly commission checks to
broker/dealers.
Daily Transmission of Reports Transmit daily transaction activity reports,
balancing reports, and sales information via
telephone lines to a printer at Nuveen.
Fund Summary Sheets Prepare daily reports that summarize by type
of transaction all capital stock activity for
each fund. Transmit/download wire/capital
stock activity information to Chase.
Sales Reporting Provide daily, weekly, monthly, quarterly,
and annual reports of sales information.
12b-1 Reporting Complete 12b-1 processing including
calculating the 12b-1 payment amounts and
sending checks to the broker/dealer home
offices. Provide a listing broken down by
sales representative within each branch.
Invalid Taxpayer Identification Mail Forms W-9 as required to validate
Number Solicitation and taxpayer identification numbers; institute
Backup Withholding backup withholding as required by IRS
regulations, and timely send all notices.
Regulatory Reporting Compute, prepare, and mail all necessary
reports to shareholders, federal, and/or
state authorities (Forms 1099-DIV, 1099-B,
and 1042S).
Page 2
<PAGE>
SERVICE: SSI WILL:
- ------- --------
Front-End Imaging of Documents Front-end Image all incoming documents.
Cost Basis Reporting Provide cost basis information as available
to shareholders annually for use in
determining capital gains and losses.
Blue Sky Reporting Provide monthly report of purchases and
redemptions by state.
Financial Reporting Mailings Provide mail handling for 2 financial reports
per fund per year to Nuveen shareholders.
Prospectus Mailings Provide mail handling for 1 prospectus per
fund per year to Nuveen shareholders.
Proxy Solicitation and Tabulation Perform 1 proxy solicitation and tabulation
per fund per year.
Networking Accounts Provide transmission and appropriate services
for each network level.
Cash Availability Transmit mutual fund activity to designated
entity on a daily basis for cash availability
purposes.
Commission/12b-1 Balancing Provide balancing reports for commission and
12b-1 payments.
Page 3
<PAGE>
NUVEEN CALIFORNIA TAX-FREE FUND, INC.
TRANSFER AGENCY AGREEMENT
Appendix C
Fee Schedule
The Transfer Agent will provide the transfer agent services listed on Appendix B
for the Fund at the rates set forth below:
Annual Transfer Agent Fees:
- --------------------------
From July 1, 1997 through termination
Annual-Per-Account Fees *
------------------------
First 20,000 Accts.** $ 24.80 per account
Next 30,000 Accts.** $ 22.50 per account
Over 50,000 Accts.** $ 21.40 per account
Out-Of-Pocket Expenses:
- ----------------------
Out-of-pocket expenses may be incurred by either the Fund or the Transfer
Agent and are not included in the annual Transfer Agent Fees. Those out-of-
pocket expenses directly incurred by the Transfer Agent will be billed to the
Fund on a monthly basis. These out-of-pocket expenses include, but are not
limited to, the printing of forms, envelopes, postage and proxy solicitation
fees for the shareholder mailings, costs of abandoned property reports or
searches for missing or inactive shareholders, equipment and system access
costs, microfilm, telephone line and usage charges, overnight express mail
charges, check signature plates and stamps, and programmer/analyst and testing
technician time beyond that agreed to in writing. Bank charges and earnings
credit will be billed directly to the Fund by United Missouri Bank (or other
banks). The Transfer Agent may require the prior payment of anticipated out-of-
pocket expenses, from time to time.
_________________
* Payable on a monthly basis for each non-retirement plan account in existence
at the end of the month. Retirement Plan accounts may be subject to a separate
fee schedule to be negotiated.
** The determination of the number of accounts for purposes of determining the
per account fee shall be based on all Nuveen Funds using the same fee schedule
and shall be allocated on a Fund by Fund basis in a manner determined by the
Transfer Agent based on the number of accounts in each fund.
The Transfer Agent shall, from time to time, but no more frequently than
monthly, send an invoice to the Fund itemizing the compensation and expense
reimbursement. The Fund shall pay such invoice (except to the extent that the
amount thereof is in dispute) by wire not later than 30 days after receipt of
the invoice.
<PAGE>
Exhibit 10
June 10, 1998
(202) 467-7662
Nuveen California Tax-Free Fund, Inc.
333 West Wacker Drive
Chicago, Illinois 60606
RE: Registration Statement on Form N-1A
Under the Securities Act of 1933
(File No. 33-01971)
___________________________________
Ladies and Gentlemen:
We have acted as special counsel to Nuveen California Tax-Free Fund, Inc.,
a Maryland corporation (the "Fund"), in connection with the above-referenced
Registration Statement on Form N-1A (as amended, the "Registration Statement")
which relates Fund's shares of common stock, par value $.01 (the "Shares"). This
opinion is being delivered to you in connection with the Fund's filing of Post-
Effective Amendment No. 24 to the Registration Statement (the "Amendment") with
the Securities and Exchange Commission pursuant to Rule 485(b) of the Securities
Act of 1933 (the "1933 Act"). With your permission, all assumptions and
statements of reliance herein have been made without any independent
investigation or verification on our part except to the extent otherwise
expressly stated, and we express no opinion with respect to the subject matter
or accuracy of such assumptions or items relied upon.
In connection with this opinion, we have reviewed, among other things,
executed copies of the following documents:
(a) a certification of the Maryland State Department of Assessments and
Taxation (the "Department") as to the existence and good standing of
the Fund;
(b) copies, certified by the Department, of the Fund's Articles of
Incorporation and of all amendments and all supplements thereto (the
"Charter");
(c) a certificate executed by Karen L. Healy, the Assistant Secretary of
the Fund, certifying as to, and attaching of, the Fund's Charter and
By-Laws, as amended (the "By-Laws"), and certain resolutions adopted
by the Board of Directors of the Fund authorizing the issuance of the
Shares; and
<PAGE>
Nuveen California Tax-Free Fund, Inc.
June 10, 1998
Page 2
(d) a printer's proof, dated June 3, 1998, of the Amendment.
In our capacity as counsel to the Fund, we have examined the originals, or
certified, conformed or reproduced copies, of all records, agreements,
instruments and documents as we have deemed relevant or necessary as the basis
for the opinion hereinafter expressed. In all such examinations, we have assumed
the legal capacity of all natural persons executing documents, the genuineness
of all signatures, the authenticity of all original or certified copies and the
conformity to original or certified copies of all copies submitted to us as
conformed or reproduced copies. As to various questions of fact relevant to
such opinion, we have relied upon, and assume the accuracy of, certificates and
oral or written statements of public officials and officers or representatives
of the Fund. We have assumed that the Amendment, as filed with the Securities
and Exchange Commission, will be in substantially the form of the printer's
proof referred to in paragraph (d) above.
Based upon, and subject to, the limitations set forth herein, we are of the
opinion that the Shares, when issued and sold in accordance with the Fund's
Charter and for the consideration described in the Registration Statement, will
be legally issued, fully paid and nonassessable under the laws of the State of
Maryland.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving this consent, we do not admit that we are in
the category of persons whose consent is required under Section 7 of the 1933
Act.
Very truly yours,
/s/ Morgan, Lewis & Bockius LLP
MORGAN, LEWIS & BOCKIUS LLP
<PAGE>
EXHIBIT 11
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated April 15, 1998, and to all references to our Firm included in or made a
part of this registration statement of Nuveen California Tax-Free Fund, Inc.
(comprising the California Tax-Free Money Market Fund).
ARTHUR ANDERSEN LLP
Chicago, Illinois
June 8, 1998
<PAGE>
EXHIBIT 16
SCHEDULE OF COMPUTATION OF PERFORMANCE FIGURES
I. YIELD
I. Current Yield
a. Current Yield is calculated as follows:
i. Net investment income per share for the seven-
day period
------------------------------------------------- = Base Period Return
Value of account at beginning of seven-day pe-
riod
ii. Base Period Return X 365/7 = Current Yield
b. Calculation of Current Yield for the seven-day period ended February 28,
1998:
Distribution and Service (.0005811) 365
Plan Series: (--------) X --- = 3.03%
( 1.00 ) 7 =====
Institutional Series: (.0006017) 365
(--------) X --- = 3.14%
( 1.00 ) 7 =====
II. Effective Yield
a. Effective Yield is calculated as follows:
(Base Period Return + 1) /365/7/ - 1 = Effective Yield
b. Calculation of Effective Yield for seven-day period ended February 28,
1998:
/365/7/
Distribution and Service [ (.0005811) ]
Plan Series: [ (--------) + 1 ] - 1 = 3.08%
[ ( 1.00 ) ] =====
/365/7/
Institutional Series: [ (.0006017) ]
[ (--------) + 1 ] - 1 = 3.19%
[ ( 1.00 ) ] =====
III. Taxable Equivalent Yield
a. The Taxable Equivalent Yield formula is as follows:
Tax Exempt Yield
-------------------------------
( 1 - combined Federal )
( and state income tax rate )
1
<PAGE>
b. Based on the maximum combined Federal and California income tax rate of
45.2%, the Taxable Equivalent Yield for the seven-day period ended
February 28, 1998, is as follows:
3.03%
Distribution and Service Plan Series: -------- = 5.53%
1 - .452 =====
3.14%
Institutional Series: -------- = 5.73%
1 - .452 =====
2
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary Financial Information extracted from the form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 011
<NAME> NUVEEN CALIFORNIA MONEY MARKET SERVICE
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-START> MAR-01-1997
<PERIOD-END> FEB-28-1998
<INVESTMENTS-AT-COST> 159307
<INVESTMENTS-AT-VALUE> 159307
<RECEIVABLES> 984
<ASSETS-OTHER> 660
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 160951
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 456
<TOTAL-LIABILITIES> 456
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 86916
<SHARES-COMMON-STOCK> 86916
<SHARES-COMMON-PRIOR> 95306
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 86916
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2866
<OTHER-INCOME> 0
<EXPENSES-NET> 430
<NET-INVESTMENT-INCOME> 2436
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 2436
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2436
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 161051
<NUMBER-OF-SHARES-REDEEMED> (171720)
<SHARES-REINVESTED> 2278
<NET-CHANGE-IN-ASSETS> (8391)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 313
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 451
<AVERAGE-NET-ASSETS> 78185
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .03
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.03)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .55
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary Financial Information extracted from the form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 012
<NAME> NUVEEN CALIFORNIA MONEY MARKET DISTRIBUTION
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-START> MAR-01-1997
<PERIOD-END> FEB-28-1998
<INVESTMENTS-AT-COST> 159307
<INVESTMENTS-AT-VALUE> 159307
<RECEIVABLES> 984
<ASSETS-OTHER> 660
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 160951
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 456
<TOTAL-LIABILITIES> 456
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 54789
<SHARES-COMMON-STOCK> 54789
<SHARES-COMMON-PRIOR> 57490
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 54789
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1971
<OTHER-INCOME> 0
<EXPENSES-NET> 294
<NET-INVESTMENT-INCOME> 1677
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 1677
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1677
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 31803
<NUMBER-OF-SHARES-REDEEMED> (36016)
<SHARES-REINVESTED> 1513
<NET-CHANGE-IN-ASSETS> (2701)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 214
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 356
<AVERAGE-NET-ASSETS> 53607
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .03
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.03)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .55
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary Financial Information extracted from the form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 013
<NAME> NUVEEN CALIFORNIA MONEY MARKET INSTITUTIONAL
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-START> MAR-01-1997
<PERIOD-END> FEB-28-1998
<INVESTMENTS-AT-COST> 159307
<INVESTMENTS-AT-VALUE> 159307
<RECEIVABLES> 984
<ASSETS-OTHER> 660
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 160951
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 456
<TOTAL-LIABILITIES> 456
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 18791
<SHARES-COMMON-STOCK> 18791
<SHARES-COMMON-PRIOR> 32843
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 18791
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 869
<OTHER-INCOME> 0
<EXPENSES-NET> 110
<NET-INVESTMENT-INCOME> 759
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 759
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 759
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 101302
<NUMBER-OF-SHARES-REDEEMED> (115353)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (14052)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 95
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 110
<AVERAGE-NET-ASSETS> 23586
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .03
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.03)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .47
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
EXHIBIT 99(c)
Certified Resolution
--------------------
The undersigned, Gifford R. Zimmerman, hereby certifies, on behalf of Nuveen
California Tax-Free Fund, Inc. (the "Fund"), (1) that he is the duly elected,
qualified and acting Secretary of the Fund, and that as such Secretary he has
custody of its corporate books and records, (2) that attached to this
Certificate is a true and correct copy of a resolution duly adopted by the Board
of Directors of the Fund at a meeting held on January 22, 1998, and (3) that
said resolution has not been amended or rescinded and remains in full force and
effect.
April 28, 1998
/s/ Gifford R. Zimmerman
-------------------------------
Gifford R. Zimmerman, Secretary
<PAGE>
FURTHER RESOLVED, that each member of the Board and officer of the Fund who may
be required to execute the registration statement on Form N-1A, or any amendment
or amendments thereto, be, and each of them hereby is, authorized to execute a
power of attorney appointing Timothy R. Schwertfeger, Anthony T. Dean, Bruce P.
Bedford, Larry W. Martin, Gifford R. Zimmerman, and Thomas S. Harman, and each
of them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign the registration statement, and any and all
amendments thereto, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite or
necessary to be done, as fully to all intents and purposes as he might or could
do in person, and ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue thereof.
<PAGE>
Exhibit 99(d)
NUVEEN CALIFORNIA TAX-FREE FUND, INC.
------------------
POWER OF ATTORNEY
------------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of the above
referenced organization, hereby constitutes and appoints TIMOTHY R.
SCHWERTFEGER, ANTHONY T. DEAN, BRUCE P. BEDFORD, LARRY W. MARTIN, GIFFORD R.
ZIMMERMAN, AND THOMAS S. HARMAN each of them (with full power to each of them to
act alone) his true and lawful attorney-in-fact and agent, for him on his behalf
and in his name, place and stead, in any and all capacities, to sign, execute
and affix his seal thereto and file one or more Registration Statements on Form
N-1A, under the Securities Act of 1933, as amended, and the Investment Company
Act of 1940, as amended, including any amendment or amendments thereto, with all
exhibits, and any and all other documents required to be filed with any
regulatory authority, federal or state, without limitation, granting unto said
attorneys, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in order to effectuate
the same as fully to all intents and purposes as he might or could do if
personally present, hereby ratifying and confirming all that said attorneys-in-
fact and agents, or any of them, may lawfully do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned director of the above-referenced
organization has hereunto set his hand this 1st day of July, 1997.
/s/ Judith M. Stockdale
-----------------------
STATE OF ILLINOIS )
)SS
COUNTY OF COOK )
On this 1st day of July, 1997, personally appeared before me, a Notary
Public in and for said County and State, the person named above who is known to
me to be the person whose name and signature is affixed to the foregoing Power
of Attorney and who acknowledged the same to be his voluntary act and deed for
the intent and purposes therein set forth.
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"OFFICIAL SEAL"
VIRGINIA L. CORCORAN
Notary Public, State of Illinois
My Commission Expires 10/26/97
- --------------------------------
/s/ Virginia L. Corcoran
--------------------------------
My Commission Expires: 10/26/97
