<PAGE>
As filed with the Securities and Exchange Commission on May 13, 1999.
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
[_]
File No. 33-01971
Pre-Effective Amendment No.
--- [_]
[X]
Post-Effective Amendment No. 25
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
[_]
File No. 811-04508
[X]
Amendment No. 25
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)
[X]
[_] on June 25, 1999 pursuant to para-
graph (a)(1)
75 days after filing pursuantto para-
graph (a)(2)
[_]
on (date) 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.
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<PAGE>
CONTENTS
OF
POST-EFFECTIVE AMENDMENT NO. 25
TO
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
FILE NO. 33-01971
AND
AMENDMENT NO. 25
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
Part A-The Prospectus
Part B-The Statement of Additional Information
Copies of Annual Reports to Shareholders for the Nuveen
California Tax-Exempt 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>
PART A--PROSPECTUS
NUVEEN CALIFORNIA TAX-FREE FUND, INC.
333 West Wacker Drive
Chicago, Illinois 60606
<PAGE>
June 25, 1999 Prospectus
NUVEEN
Mutual Funds
Nuveen California Tax-Exempt
Money Market Fund
For investors
seeking
attractive double
tax-free income
and
stability
of principal
Featuring Portfolio Management By Nuveen Investment Advisory Services
A Premier Adviser/SM/ for Income Investing
- ------------------------------------------------------
The Securities and Exchange Commission has not
approved or disapproved these securities or
passed upon the adequacy of this prospectus. Any
representation to the contrary is a criminal offense.
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<PAGE>
Table of Contents
Section 1 The Fund
This section provides you with an overview of the fund including investment
objectives, portfolio holdings and historical performance information.
Introduction 1
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Nuveen California Tax-Exempt Money Market Fund 2
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Section 2 How We Manage Your Money
This section gives you a detailed discussion of our investment and
risk management strategies.
Who Manages the Fund 4
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What Securities We Invest In 4
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How We Select Investments 5
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How We Manage Risk 6
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Section 3 How You Can Buy and Sell Shares
This section provides the information you need to move money into
and out of your account.
How to Buy Shares 8
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Systematic Investing 9
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Special Services 9
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How to Sell Shares 10
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Section 4 General Information
This section summarizes the fund's distribution policies and other
general information.
Dividends, Distributions and Taxes 12
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Taxes and Reporting 12
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Service Plan 13
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Net Asset Value 14
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Fund Service Providers 14
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Year 2000 14
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Section 5 Financial Highlights
This section provides the fund's financial performance for the past
five years. 15
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We have used the icons below throughout this prospectus to make it easy for you
to find the type of information you need.
Investment
Strategy
Risks
Fees, Charges
and Expenses
Shareholder
Instructions
Performance and
Current Portfolio
Information
<PAGE>
June 25, 1999
Section 1 The Fund
Nuveen California Tax-Exempt Money Market Fund
Introduction
This prospectus is intended to provide important information to help you
evaluate whether the Nuveen California Tax-Exempt Money Market Fund may be right
for you. Please read it carefully before investing and keep it for future
reference.
Regular Income, Convenience and Stability of Principal
Money market funds offer you the opportunity to earn income on your cash
reserves while also providing easy access to your money and stability of
principal. They can provide a convenient way to make gradual transfers into
stock or bond funds, or to lower the overall risk of your portfolio.
The fund invests in high quality municipal money market securities that its
investment adviser believes present minimal credit risks. The fund's investment
policies are designed to mitigate overall risk and maintain a constant price per
share of $1.00, but there can be no guarantee of this.
------------------------------------------------------------------------
| NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE |
------------------------------------------------------------------------
Section 1 The Fund 1
<PAGE>
Nuveen California Tax-Exempt Money Market Fund
Fund Overview
Investment Objective
The fund's investment objective is to provide as high a level of current income
exempt from both regular federal and California personal income taxes as is
consistent with the stability of principal and the maintenance of liquidity.
How the Fund Pursues Its Objective
The fund invests substantially all of its assets in high quality, California
tax-exempt money market instruments that the fund's investment adviser believes
present minimal credit risks. The adviser selects money market instruments based
on its assessment of current market interest rates and its market outlook. The
adviser seeks to identify money market instruments with favorable
characteristics the adviser believes are not yet recognized by the market.
What are the Risks of Investing in the Fund?
While the fund invests in securities its investment adviser believes present
minimal credit and interest rate risks, the fund is not risk free. The value of
the fund's investments may be adversely affected by changes in prevailing
interest rates, an issuer's credit quality or California's economy. The fund's
investment policies are designed to mitigate these risks and maintain a constant
price per share of $1.00, but there can be no guarantee of this. Like any mutual
fund investment, loss of money is a risk of investing.
Is This Fund Right for You?
The fund may be appropriate for you if you seek to:
. Earn regular income on your cash reserves with check-writing privileges;
. Maintain stability of principal;
. Make gradual transfers into stock or bond funds; or;
. Lower the overall risk of your investment portfolio.
You should not invest in this fund if you seek to pursue long-term growth of
principal.
How the Fund Has Performed
The chart and table below illustrate annual fund returns for each of the past
ten years as well as annualized fund and index returns for the one-, five-year,
ten-year and since inception periods ended December 31, 1998. This information
is intended to help you assess the variability of fund returns over the past ten
years (and consequently, the potential rewards and risks of a fund investment).
Past performance is not necessarily an indication of future performance.
Total Returns/1/
[BAR CHART APPEARS HERE]
Annual Returns*
1989 5.94%
1990 5.39%
1991 4.09%
1992 2.44%
1993 1.96%
1994 2.38%
1995 3.44%
1996 2.99%
1997 3.15%
1998 2.97%
*The year-to-date return as of March 31, 1999 was .56%.
During the last ten years ended December 31, 1998, the highest and lowest
quarterly returns were 1.56% and .45%, respectively, for the quarters ended June
30, 1989 and March 31, 1993.
<TABLE>
<CAPTION>
Average Annual Total Returns for
the Periods Ended December 31, 1998
-----------------------------------
1 Year 5 Year 10 Year
-----------------------------------
<S> <C> <C> <C>
Nuveen California Tax-Exempt
Money Market Fund 2.97% 2.99% 3.47%
- -------------------------------------------------------------------
Lipper Index/2/ 2.77% 3.00% 3.47%
</TABLE>
Based on the seven-day period ended December 31, 1998, the fund's yield was
3.08%, and the taxable equivalent yield (using maximum federal income tax rate
of 39.6%) was 5.10%. For the fund's current yields, please call Nuveen at (800)
257-8787.
2 Section 1 The Fund
<PAGE>
What are the Costs of Investing?
<TABLE>
<CAPTION>
<S> <C>
Shareholder Transaction Expenses
Paid Directly From Your Investment
- ------------------------------------------------
Maximum Sales Charge Imposed
on Purchases None
- ------------------------------------------------
Maximum Sales Charge Imposed
on Reinvested Dividends None
- ------------------------------------------------
Exchange Fees None
- ------------------------------------------------
<CAPTION>
Annual Fund Operating Expenses/4/
Paid From Fund Assets
<S> <C>
Management Fees .39%
- ------------------------------------------------
12b-1 Distribution and Service Fees/5/ .25%
- ------------------------------------------------
Other Expenses .10%
- ------------------------------------------------
Total Operating Expenses--Gross+ .74%
- ------------------------------------------------
+ After Expense Reimbursements
- ------------------------------------------------
Expense Reimbursements -.19%
- ------------------------------------------------
Total Operating Expenses--Net .55%
- ------------------------------------------------
</TABLE>
Total Operating Expenses--Net reflect the undertaking of the fund's advisor to
reimburse expenses through December 31, 1999 in an amount necessary to limit
total operating expenses to .55%. Thereafter, reimbursements may be terminated
or modified at the adviser's discretion without notice.
Example
The following example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. The example assumes
you invest $10,000 in the fund for the time periods indicated, and then redeem
all your shares at the end of a period. The example also assumes that your
investment has a 5% return each year and that the fund's operating expenses
remain the same. Your actual returns and costs may be higher or lower.
<TABLE>
<CAPTION>
<S> <C>
1 Year $ 66
- ------------------------------------------------
3 Years $208
- ------------------------------------------------
5 Years $362
- ------------------------------------------------
10 Years $810
- ------------------------------------------------
How the Fund Is Invested (as of 05/31/99)
<CAPTION>
<S> <C>
Portfolio Statistics
Weighted Average Maturity (Days) 29
- ------------------------------------------------
Credit Quality
Industry Diversification (Top 5)
Tax Obligation/General 23%
- ------------------------------------------------
Tax Obligation/Limited 18%
- ------------------------------------------------
Housing/Multifamily 17%
- ------------------------------------------------
Healthcare 16%
- ------------------------------------------------
Water and Sewer 9%
- ------------------------------------------------
</TABLE>
1. Before June 1999, the fund offered three share classes. Returns reflect the
performance of the Distribution Series adjusted for any differences between
the fund's current fees and those of the Distribution Series.
2 Lipper Index returns reflect the performance of funds in the Lipper
California Tax-Exempt Money Market Index. Returns assume reinvestment of
dividends and do not reflect any applicable sales charge.
3. Expense information has been restated to reflect current fees payable under
the investment management agreement and 12b-1 Plan approved at the June 4,
1999 Shareholder Meeting.
4. The 12b-1 fees paid by the Fund increased since the last fiscal year to .25%
because the number of authorized dealers has increased and Nuveen has begun
retaining 12b-1 fees on accounts with no authorized dealer for which Nuveen
provides on-going shareholder account services.
Section 1 The Fund 3
3
<PAGE>
Section 2 How We Manage Your Money
To help you understand how the fund's assets are managed, this section includes
a detailed discussion of the adviser's investment and risk management
strategies. For a more complete discussion of these matters, please consult the
Statement of Additional Information.
Who Manages the Fund
Nuveen Investment Advisory Services provides advisory and investment management
services to a broad range of clients. Nuveen Investment Advisory Services is
comprised of Nuveen Advisory Corp. and Nuveen Institutional Advisory Corp., both
of which are wholly-owned subsidiaries of John Nuveen & Co. Incorporated
(Nuveen). Nuveen Advisory Corp. (Nuveen Advisory) is the fund's investment
adviser and as such is responsible for the selection and on-going monitoring of
the securities in the fund's portfolio, managing the fund's business affairs and
providing certain clerical, bookkeeping and other administrative services.
Nuveen Advisory is located at 333 West Wacker Drive, Chicago, IL 60606. For
providing those services, Nuveen Advisory is paid an annual management fee. For
the most recent fiscal year, the Fund paid .40% of its average net assets to
Nuveen Advisory for its services.
Founded in 1898, Nuveen has been synonymous with investments that withstand the
test of time. Today, we offer a broad range of quality investments designed for
individuals seeking to build and maintain wealth. Nuveen is the sponsor and
principal underwriter of the fund's shares and has sponsored or underwritten
more than $60 billion of investment company securities. Nuveen and its
affiliates have approximately $50 billion in assets under management.
What Securities We Invest In
California Tax-Exempt Money Market Instruments
The Fund invests in high quality, short-term California tax-exempt debt
securities, commonly known as California municipal money market securities
substantially all of which are issued within the State of California. California
municipal money market securities pay income which is exempt from both regular
federal income tax and California state personal income taxes.
States and local governments, municipalities, agencies and other governmental
units issue municipal money market instruments to raise money for various public
purposes, such as building public facilities, refinancing outstanding debt and
financing general operating expenses. These instruments include general
obligation bonds, which are backed by the full faith and credit of the issuer
and may be repaid from any revenue source, and revenue bonds, which may be
repaid only from the revenue of a specific facility or source. Tax-exempt
instruments also include notes, such as bond anticipation, revenue anticipation,
construction loan and bank notes, and commercial paper.
4 Section 2 How We Manage Your Money
<PAGE>
Credit-Enhanced Investments
Some of the fund's investments may be backed by a letter of credit or other type
of credit enhancement. For example, if an issuer does not have the desired
credit rating, another company may use its higher credit rating to back the
issuer's rating by selling the issuer a letter of credit. Investments backed by
a letter of credit are subject to the risk that the company issuing the letter
of credit will not be able to fulfill its obligations to the fund, or is thought
to be unlikely to be able to do so. This could cause losses to the fund and
affect its share price.
Variable Rate and Floating Rate Demand Notes
We expect variable rate and floating rate securities will comprise a large
portion of the fund's portfolio. These investments may have stated maturities of
more than 397 days, but generally allow the holder to receive payment of
principal plus accrued interest much sooner than this. Because their interest
rates are not fixed, the income earned by the fund on these securities generally
will fluctuate with changes in short-term interest rates.
When-Issued and Delayed Delivery Transactions
The fund may buy or sell securities on a when-issued or delayed delivery basis,
paying for or taking delivery of the securities at a later date, normally within
15-45 days of the trade. These transactions involve an element of risk because
the value of the security to be purchased may decline before the settlement
date.
Temporary Strategies
The fund on a temporary basis may invest in municipal money market securities
whose income is not exempt from California state personal income taxes, or in
taxable money market securities. Taxable money market securities include U.S.
government securities, quality commercial paper or similar fixed-income
securities with remaining maturities of one year or less. The fund will only do
so under extraordinary circumstances or unusual market conditions. Under these
circumstances, the fund will not be pursuing its investment objective.
Section 2 How We Manage Your Money 5
<PAGE>
An Important Note About Risk
Although the fund's investment policies are intended to minimize interest rate
and credit risk, there can be no guarantee of this.
How We Select Investments
Nuveen Advisory selects money market instruments based on its assessment of
current market interest rates and its market outlook. Portfolio managers are
supported by a team of specialized research analysts who review securities
available for purchase, monitor the continued creditworthiness of the fund's
investments, and analyze economic, political and demographic trends affecting
the California money market. We seek to identify money market instruments with
favorable characteristics we believe are not yet recognized by the market. We
then select those higher-yielding and undervalued money market instruments that
we believe represent the most attractive values without adding undue risk. We
actively manage the maturity of the fund and its portfolio to optimally balance
the fund's yield with the fund's exposure to interest rate risk.
How We Manage Risk
Risk is inherent in all investing. Investing in a mutual fund -- even a money
market fund -- involves risk, including the risk that you may receive little or
no return on your investment or even that you may lose part of your investment.
In pursuing its investment objective, the fund assumes investment risk, chiefly
in the form of interest rate and credit risk. The fund tries to limit risk by
restricting the types and maturities of the money market instruments it
purchases, and by diversifying its investment portfolio among issuers and across
different industries. Therefore, before investing, you should consider carefully
the following risks that you assume when you invest in the fund.
Interest rate risk: Because the fund invests in fixed-income securities, the
fund is subject to interest rate risk. Interest rate risk is the risk that the
value of the fund's portfolio will decline because of rising interest rates.
Interest rate risk is generally lower for shorter-term investments and higher
for longer-term investments.
To mitigate interest rate risk, the fund, under normal market conditions,
maintains an investment portfolio with an overall weighted average maturity of
90 days or less. In addition, the fund limits its investments to money market
instruments with remaining effective maturities of 397 days or less.
Credit risk: The fund is subject to credit risk. Credit risk is the risk that an
issuer of a money market instrument will be unable to meet its obligation to
make interest and principal payments due to changing financial or market
conditions, or possibly due to Year 2000 issues (see below).
The fund attempts to mitigate credit risk by investing only in high quality
money market instruments that Nuveen Advisory believes present minimal credit
risks at the time of purchase. High quality instruments are:
. rated in one of the two highest short-term rating categories by at least two
nationally recognized rating services, or
6 Section 2 How We Manage Your Money
<PAGE>
. if only one service has rated the instrument, rated by that service in one of
its two highest short-term rating categories, or
. unrated instruments that Nuveen Advisory judges to be of comparable quality.
In addition, the fund will not invest more than 5% of its total assets in money
market instruments rated in the second highest short-term rating categories or
in their unrated equivalents.
Year 2000 issues may affect the ability of issuers to meet their interest and
principal payment obligations to their bond holders, and may adversely affect
the bonds' credit ratings and values. Municipal issuers may have greater Year
2000 risks than other issuers. Nuveen Advisory is requesting information from
municipal issuers so that Nuveen Advisory can take the issuers' Year 2000
readiness, if made available, into account in making investment decisions. There
can be no assurance that issuers will provide this information to Nuveen
Advisory, or that issuers will begin or complete the work necessary to address
any Year 2000 issues on a timely basis. Generally, higher rated fixed-income
securities carry less credit risk than lower rated fixed-income securities.
Concentration risk: Concentration risk is the risk that economic or other
developments affecting a single industry may cause the value of related money
market instruments to decline.
To mitigate concentration risk, the fund will not invest more than 25% of its
total assets in any one industry, excluding governmental issuers. The fund may,
however, invest more than 25% of its assets in a broad segment of the tax-exempt
market, such as instruments issued to fund hospitals, housing or airports, if
Nuveen Advisory believes that the potential returns justify any additional risks
that may arise from doing so. These policies on concentration risk may not be
changed without shareholder approval.
The fund may invest without limit in securities backed by letters of credit or
other credit enhancements issued by banks and other financial institutions. As a
result, changes in the banking industry may cause the value of securities backed
by such credit enhancements to decline.
State Specific Risk: Because the fund invests primarily in California municipal
money market securities, it bears investment risk from the economical, political
or regulatory changes that could adversely affect municipal issuers in the state
and therefore the value of the fund's portfolio. See "Appendix--Additional State
Information."
Insurance: The fund has purchased liability insurance against a decline in the
value of the fund's portfolio caused by the default or bankruptcy of an issuer
whose securities are owned by the fund. The insurance covers substantially all
of the fund's investments except U.S. government securities. The maximum total
coverage for all Nuveen money market funds is $50 million, with a deductible for
each loss of 0.10% of the fund's net assets. The fund pays the policy's
premiums. Coverage under the policy is subject to certain conditions and may not
be renewable upon expiration. While the policy is intended to provide some
protection against credit risk and to help the fund maintain a constant price
per share of $1.00, there is no guarantee that the insurance will do so.
Section 2 How We Manage Your Money 7
<PAGE>
Section 3 How You Can Buy and Sell Shares
We offer a number of services for your convenience. Please see the Statement of
Additional Information for further details.
How to Buy Shares
The fund offers only a single Class of Shares. Fund shares may be purchased at
net asset value on any business day, which is any day the Federal Reserve Bank
of Boston is normally open for business. Generally, the Bank is closed on
weekends and national holidays. The fund's net asset value is determined at
12:00 noon Eastern Time on each business day, and on other days where there is
significant trading activity in the fund's shares. If the fund receives your
order in proper form before 12:00 noon and the fund's custodian receives federal
funds from you before 3:00 p.m., Eastern Time, you will receive the dividend
declared and net asset value computed on that day. Otherwise, you will receive
the next business day's dividend and net asset value.
Through a Financial Adviser
You may purchase shares through your financial adviser, who can handle all the
details for you, including opening a new account. Financial advisers also can
help you review your financial needs and formulate long-term investment goals
and objectives. In addition, financial advisers generally can help you develop a
customized financial plan, select investments, and monitor and review your
portfolio on an on-going basis to help assure that your investments continue to
meet your needs as circumstances change. Financial advisers are paid for on-
going investment advice and services either from fund sales charges and fees or
by charging you a separate fee in lieu of a sales charge. If you do not have a
financial adviser, call (800) 257-8787 and Nuveen can refer you to one in your
area.
By Mail
You may open an account and buy shares through the mail by completing the
enclosed application and mailing it along with your check to the fund, c/o
Nuveen Investor Services, P.O. Box 5186, Bowling Green Station, New York, NY
10274-5186.
Investment Minimums
The minimum initial investment is $3,000 ($50 if you establish a systematic
investment plan). Subsequent investments must be in amounts of $50 or more. The
fund reserves the right to reject purchase orders and to waive or increase the
minimum investment requirements.
8 Section 3 How You Can Buy and Sell Shares
<PAGE>
- --------------------------------------------------------------------------------
Systematic Investing
- --------------------------------------------------------------------------------
Once you have established a fund account, you may participate in the fund's
systematic investment plan. Systematic investing allows you to make regular
investments through automatic deductions from your bank account or directly from
your paycheck. The minimum automatic deduction is $50 per month. There is no
charge to participate in the fund's systematic investment plan. You can stop the
deductions at any time by notifying the fund in writing.
From Your Bank Account
You can make systematic investments by authorizing us to draw preauthorized
checks on your bank account. To do this, simply complete the appropriate section
of the account application form or submit an account update form.
From Your Paycheck
With your employer's consent, you can make systematic investments by authorizing
your employer to deduct monies from your paycheck. To do this, contact your
financial adviser or call Nuveen at (800) 257-8787.
- --------------------------------------------------------------------------------
Special Services
- --------------------------------------------------------------------------------
To help make your investing with us easy and efficient, we offer you the
following services at no extra cost.
Exchanging Shares
You may exchange fund shares into an identically registered account at any time
for an appropriate class of another Nuveen mutual fund available in your state.
Your exchange must meet the minimum purchase requirements of the fund into which
you are exchanging. You may have to pay a sales charge when exchanging shares
that you purchased without a sales charge for shares that are sold with a sales
charge. Please consult the Statement of Additional Information for details.
The fund may change or cancel its exchange policy at any time upon 60 days'
notice. Because an exchange is treated for tax purposes as a purchase and sale,
and any gain may be subject to tax, you should consult your tax adviser about
the tax consequences of exchanging your shares.
Fund Direct/SM/
The Fund Direct Program allows you to link your fund account to your bank
account, transfer money electronically between these accounts, and perform a
variety of account transactions, including purchasing shares by telephone and
investing through a systematic investment plan. You also may have dividends,
distributions, redemption payments or systematic withdrawal plan payments sent
directly to your bank account. Your financial adviser can help you complete the
forms for these services, or you can call Nuveen at (800) 257-8787 for copies of
the necessary forms.
- --------------------------------------------------------------------------------
How to Sell Shares
- --------------------------------------------------------------------------------
You may sell (redeem) your shares on any business day. You will receive the
share price next determined after the fund has received your properly completed
redemption request. If you are selling shares purchased recently with a check,
you will not receive your redemption proceeds until your check has cleared. This
may take up to ten days from your purchase date.
Section 3 How You Can Buy and Sell Shares 9
<PAGE>
Through Your Financial Adviser
You may sell your shares through your financial adviser who can prepare the
necessary documentation. Your adviser may charge you for this
service.
By Telephone
If you have authorized telephone redemption privileges, you can redeem your
shares by calling (800) 257-8787. Telephone redemptions are not available if you
own shares in certificate form and may not exceed $50,000. Checks will only be
issued to you as the shareholder of record and mailed to your address of record.
If you have established Fund Direct privileges, you may have redemption proceeds
transferred electronically to your bank account. We will normally mail your
check the next business day.
By Check
You may request that the fund provide you with redemption checks. These checks
may be made payable to any person in the amount of $500 or more. Simply fill out
the appropriate section of the application form and submit the enclosed
signature card. You must have enough shares in your account to cover the amount
of each check you write or it will be returned. Writing checks from your fund
account does not mean that your account is like a bank checking account. This
check redemption privilege may be modified or terminated at any time.
By Mail
You can sell your shares at any time by sending a written request to the fund,
c/o Nuveen Investor Services, P.O. Box 5186, Bowling Green Station, New York, NY
10274-5186. Your redemption request must include the following information:
. The fund's name;
. Your name and account number;
. The dollar or share amount you wish to redeem;
. The signature of each owner exactly as it appears on the account;
. The name of the person to whom you want your redemption proceeds paid (if
other than to the shareholder of record);
. The address where you want your redemption proceeds sent (if other than the
address of record); and
. Any required signature guarantees (see below).
The fund will normally mail your check the next business day after it receives
your redemption request, but in no event more than seven days after the fund
receives your request. If you purchased your shares by check, your redemption
proceeds will not be mailed until your check has cleared. This may take up to
ten days from your purchase date.
Signature Guarantees
Signature guarantees are required if you are redeeming more than $50,000, you
want the check payable to someone other than the shareholder of
An Important Note About Telephone Transactions
Although Nuveen Investor Services has certain safeguards and procedures to
confirm the identity of callers, it will not be liable for losses resulting from
following telephone instructions it reasonably believes to be genuine. Also, you
should verify your trade confirmations immediately upon receipt.
10 Section 3 How You Can Buy and Sell Shares
<PAGE>
record, you want the check sent to another address, or if the address on the
fund's records has been changed within the last 60 days. Signature guarantees
must be obtained from a bank, brokerage firm or other financial intermediary
that is a member of an approved Medallion Guarantee Program or that is otherwise
approved by the fund. A notary public cannot provide a signature guarantee.
Systematic Withdrawal
If the value of your fund account is at least $10,000, you may participate in
the fund's systematic withdrawal plan. The plan allows you to make regular
withdrawals through automatic deductions from your fund account. The minimum
automatic withdrawal is $50 per month. You may elect to receive payments
monthly, quarterly, semi-annually or annually, and may choose to receive a
check, or have the monies transferred directly to your bank account (see
"Special Services -- Fund Direct" above), paid to a third party or sent payable
to you at an address other than the address on the fund's records. To
participate in the systematic withdrawal plan, simply complete the appropriate
section of the account application or submit an account update form.
Redemptions In-Kind
The fund generally pays redemption proceeds in cash. Under unusual conditions
that make cash payment unwise and for the protection of existing shareholders,
the fund may pay all or a portion of your redemption proceeds in securities or
other fund assets. Although it is unlikely that your shares would be redeemed
in-kind, you would probably have to pay brokerage costs to sell the securities
distributed to you, as well as taxes on any capital gains from that sale.
An Important Note About Involuntary Redemption
From time to time, the fund may establish minimum account size requirements. The
fund reserves the right to liquidate your account upon 30 days' written notice
if the value of your account falls below an established minimum. The fund
presently has set a minimum account balance of $100 unless you have an active
Nuveen Defined Portfolio reinvestment account.
Section 3 How You Can Buy and Sell Shares 11
<PAGE>
Section 4 General Information
To help you understand the tax implications of investing in the fund, this
section includes important details about how the fund makes distributions to
shareholders. We discuss some other fund policies, as well.
- --------------------------------------------------------------------------------
Dividends, Distributions and Taxes
- --------------------------------------------------------------------------------
The fund pays double tax-free dividends monthly. In the very unlikely event that
the fund realizes capital gains or ordinary income subject to regular federal
income tax, it will pay any capital gains or other taxable distributions
annually in March. The fund declares dividends on each business day to
shareholders of record on that day.
Payment and Reinvestment Options
The fund automatically reinvests your dividends in additional fund shares unless
you request otherwise. You may request to have your dividends paid to you by
check, deposited directly into your bank account, paid to a third party, sent to
an address other than the address on the fund's records, or reinvested in shares
of another Nuveen mutual fund. For more information, contact your financial
adviser or call Nuveen at (800) 257-8787.
- --------------------------------------------------------------------------------
Taxes and Tax Reporting
- --------------------------------------------------------------------------------
Because the fund invests in California municipal money market securities, your
regular monthly dividends will be exempt from regular federal as well as
California state income taxes. A portion of these dividends, however, may be
subject to the federal alternative minimum tax.
Although very unlikely, the fund may, from time to time, distribute taxable
ordinary income or capital gains. Capital gains are taxable to shareholders
either as ordinary income or as long-term capital gains, depending on how long
the fund owned the investment.
Early in each year, you will receive a statement detailing the amount and nature
of all dividends and capital gains that you were paid during the prior year. If
you hold your investment at the firm where you purchased your fund shares, you
will receive the statement from that firm. If you hold your shares directly at
the fund, Nuveen will send you the statement. The tax status of your dividends
is the same whether you reinvest your dividends or elect to receive them in
cash.
If you receive social security or railroad retirement benefits, you should
consult your tax adviser about how an investment in the fund may affect the
federal taxation of your benefits. The State of California does not tax any
portion of these benefits.
12 Section 4 General Information
<PAGE>
Please note that if you do not furnish the fund with your correct Social
Security number or employer identification number, federal law requires the fund
to withhold federal income tax from your distributions and redemption proceeds,
currently at a rate of 31%.
Please consult the Statement of Additional Information and your tax adviser for
more information about taxes.
Taxable Equivalent Yields
The taxable equivalent yield is the current yield you would need to earn on a
taxable investment in order to equal a stated tax-free yield on a municipal
investment. To assist you to more easily compare municipal investments like the
funds with taxable alternative investments, the table below presents the taxable
equivalent yields for a range of hypothetical tax-free yields and tax rates.
<TABLE>
<CAPTION>
Taxable Equivalent Yield
- ---------------------------------------------------------------------------
Combined Federal and Tax-Exempt Yields
State Tax Rates 2.00% 2.50% 3.00% 3.50% 4.00%
...........................................................................
<S> <C> <C> <C> <C> <C>
% 5.56%
...........................................................................
% 5.80%
...........................................................................
% 6.25%
...........................................................................
% 6.62%
...........................................................................
</TABLE>
The yields and tax rates shown above are hypothetical and do not predict your
actual returns or effective tax rate. For more detailed information, see the
Statement of Additional Information or consult your tax adviser.
Service Plan
Nuveen serves as the selling agent and distributor of the fund's shares. In this
capacity, Nuveen manages the offering of the fund's shares and is responsible
for all sales and promotional activities, and for providing certain services to
shareholders. The fund has adopted a service plan in accordance with Rule 12b-1
under the Investment Company Act of 1940 to reimburse Nuveen for these services.
The service fee payable under the plan is .25% of the average daily net assets
of serviced accounts. Nuveen uses this fee to compensate authorized dealers,
including Nuveen, for providing on-going account services to shareholders. These
services may include establishing and maintaining your account, answering your
questions and providing other personal services to you. Because these fees are
paid out of the fund's assets on an on-going basis, over time these fees will
increase the cost of your investment. Nuveen may, in its discretion and from its
own resources, pay certain financial service firms additional amounts for
services rendered to shareholders.
Net Asset Value
The price you pay and receive for your shares is based on the fund's net asset
value per share, which is determined at 12:00 noon Eastern Time on each business
day. Because the fund seeks to maintain a constant price per share of $1.00, the
fund values its portfolio securities using the amortized cost method, which
approximates market value and is described in more detail in the Statement of
Additional Information. There can be no
Section 4 General Information 13
<PAGE>
assurance that the fund will be able to maintain a constant price per share of
$1.00.
Fund Service Providers
The custodian of the fund's assets is The Chase Manhattan Bank, 4 New York
Plaza, New York, NY 10004-2413. Chase also provides certain accounting services
to the fund. The fund's transfer, shareholder services and dividend paying
agent, Chase Global Funds Services Company, P.O. Box 5186, New York, NY
10274-5186, performs bookkeeping, data processing and administrative services
for the maintenance of shareholder accounts.
Year 2000
The fund's service providers rely on computer systems to manage the fund's
investments, process shareholder transactions and provide shareholder account
maintenance. Because of the way computers historically have stored dates, some
of these systems currently may not be able to correctly process activity
occurring in the year 2000. Nuveen is working with the fund's service providers
to adapt their systems to address this issue. Nuveen and the fund expect that
the necessary work will be completed on a timely basis, although there can be no
assurance of this.
14 Section 4 General Information
<PAGE>
Section 5 Financial Highlights
Section 5 General Information 15
<PAGE>
Appendix Additional State Information
Because the fund invests primarily in California tax-exempt investments, it is
more vulnerable than more geographically diversified tax-exempt funds to the
California economy and issues encountered by tax exempt issuers in California
such as the inability or perceived inability of the state or local municipality
(or their agencies or instrumentalities) to collect sufficient tax or other
revenues to meet their payment obligations, the placement of constitutional or
statutory limits on a tax-exempt issuer's ability to raise revenues or increase
taxes, and economic or demographic factors that may cause a decrease in tax or
other revenues for the state or local municipality (or their agencies or
instrumentalities).
These factors, among others, may affect tax-exempt issuers' ability to pay their
obligations when due and may adversely impact the fund and its shareholders.
The State of California experienced economic recessions during the late
1980's/early 1990's, and the credit ratings assigned to California's general
obligation bonds were reduced by at least one rating agency since 1990. The
State of California may experience financial difficulties in the future, which
could lead to reductions in California's credit standing and the credit standing
of certain local governments.
16
<PAGE>
Nuveen Mutual Funds
Nuveen offers a variety of mutual funds designed to help you reach your
financial goals. The funds below are grouped by investment objectives.
Growth
Nuveen Rittenhouse Growth Fund
Growth and Income
Growth and Income Stock Fund
Balanced Stock and Bond Fund
Balanced Municipal and Stock Fund
Dividend and Growth Fund
European Value Fund
Income
Income Fund
Tax-Free Income
National Municipal Bond Funds
Long-term Intermediate-term
Insured Long-term Limited-term
State Municipal Bond Funds
Arizona Louisiana North Carolina
California/1/ Maryland Ohio
Colorado Massachusetts/1/ Pennsylvania
Connecticut Michigan Tennessee
Florida Missouri Virginia
Georgia New Jersey Wisconsin
Kansas New Mexico
Kentucky New York/1/
Cash Reserves
Money Market Fund
Municipal Money Market Fund
California Tax-Exempt Money Market Fund
New York Tax-Exempt Money Market Fund
Several additional sources of information are available to you. The Statement of
Additional Information, incorporated by reference into this prospectus, contains
detailed information on fund policies and operations. Shareholder reports
contain management's discussion of market conditions, investment strategies and
performance results as of the fund's latest semi-annual or annual fiscal year
end. Call Nuveen at (800) 257-8787 to request a free copy of any of these
materials or other fund information, or ask your financial adviser for copies.
You also may obtain this and other fund information directly from the Securities
and Exchange Commission (SEC). The SEC may charge a copying fee for this
information. Visit the SEC on-line at http://www.sec.gov or in person at the
SEC's Public Reference Room in Washington, D.C. Call the SEC at (800) SEC-0330
for room hours and operation. You also may request fund information by writing
to the SEC's Public Reference Section, Washington, D.C. 20549. The fund's
Investment Company Act file number is 811-04508.
1. Long-term and insured long-term portfolios.
NUVEEN
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
(800) 257-8787
www.nuveen.com
MMPR-MM 6-99
<PAGE>
PART B--STATEMENT OF ADDITIONAL INFORMATION
NUVEEN CALIFORNIA TAX-FREE FUND, INC.
333 West Wacker Drive
Chicago, Illinois 60606
<PAGE>
Statement of Additional Information
June 25, 1999
Nuveen California Tax-Exempt Fund, Inc.
333 West Wacker Drive
Chicago, Illinois 60606
NUVEEN CALIFORNIA TAX-EXEMPT MONEY MARKET FUND
This Statement of Additional Information is not a prospectus. This Statement of
Additional Information should be read in conjunction with the Prospectus of the
Nuveen California Tax-Exempt Money Market Fund dated June 25, 1999. The Pro-
spectus may be obtained without charge from certain securities representatives,
banks, and other financial institutions that have entered into sales agreements
with John Nuveen & Co. Incorporated, or from the Fund by mailing a written re-
quest to the Fund, c/o. John Nuveen & Co. Incorporated ("Nuveen"), 333 West
Wacker Drive, Chicago, Illinois 60606 or by calling (800) 257-8787.
<TABLE>
<S> <C>
Table of Contents Page
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Investment Policies and Investment Portfolio S-2
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Management S-20
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Investment Adviser and Investment Management Agreement S-24
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Portfolio Transactions S-25
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Net Asset Value S-26
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Tax Matters S-28
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Performance Information S-32
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Additional Information on the Purchase and Redemption of Fund Shares S-37
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Service Plan S-40
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Other Information Regarding Shares of the Fund S-41
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</TABLE>
Principal
Underwriter Investment Adviser Independent Public
John Nuveen & Co. Nuveen Advisory Accountants
Incorporated Corp., for the Fund
Subsidiary of John Arthur Andersen LLP
Chicago: Nuveen & 33 West Monroe
333 West Wacker Co. Incorporated Street
Drive Chicago, 333 West Wacker Chicago, Illinois
Illinois 60606 Drive 60603
(312) 917-7700 Chicago, Illinois
60606 Transfer and
New York: Dividend
10 East 50th Street Custodian Disbursing Agent
New York, New York The Chase Manhattan Chase Global Funds
10022 Bank Services Company
(212) 207-2000 4 New York Plaza P.O. Box 5186
New York, New York 10004
New York, NY 10274
<PAGE>
INVESTMENT POLICIES AND INVESTMENT PORTFOLIO
Investment 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 the Fund from in-
vesting in Municipal Obligations secured by real estate or interests therein or
foreclosing upon and selling such security;
(8) Purchase or sell commodities or commodities contracts or oil, gas or other
mineral exploration or development programs.
(9) Make loans, other than by entering into repurchase agreements and through
the purchase of Municipal Obligations or temporary investments in accordance
with its investment objective, policies and limitations;
(10) Make short sales of securities or purchase any securities on margin, ex-
cept for such short-term credits as are necessary for the clearance of 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.
S-2
<PAGE>
(12) 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;
(13) 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;
For the purpose of applying the limitations set forth in paragraph (2) 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 securities are
backed only by its assets and revenues. Similarly, in the case of a non-govern-
mental 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 obligation of a
superior or unrelated governmental entity or other entity (other than a bond
insurer), it shall also be included in the computation of securities 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.
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.
General Information
The Nuveen California Tax-Exempt Fund, Inc. (the "Corporation") is an open-end
diversified management company incorporated as a Maryland corporation on Octo-
ber 3, 1985. It is authorized to issue 2,350,000,000 shares of Common Stock,
$.01 par value of its series the Nuveen California Tax-Exempt
S-3
<PAGE>
Money Market Fund (the "Fund"). Prior to June 1999, the Corporation and the
Fund were called the Nuveen California Tax-Free Fund, Inc. and Nuveen Califor-
nia Tax-Free Money Market Fund, respectively. Fund Shares represent an interest
in the same portfolio of investments of the Fund. Fund Shares have equal rights
as to voting, redemption, dividends and liquidation, and have exclusive voting
rights with respect to any applicable distribution or service plan. There are
no conversion, preemptive or other subscription rights. The Board of Directors
of the Fund have the right to establish additional series and classes of shares
in the future, to change those series or classes and to determine the prefer-
ences, voting powers, rights and privileges thereof.
Nuveen California Tax-Exempt Fund, Inc. is a series company under SEC Rule 18f-
2 and the 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.
Year 2000 Issues
The "Year 2000" problem refers to the fact that many computer programs use only
the last two digits of a year, and do not recognize a year that begins with
"20" instead of "19." If this problem is not corrected, computers could func-
tion improperly or not at all, which could affect the global economy. The SEC
has urged securities issuers to disclose the steps they are taking to correct
any Year 2000 problems.
The Fund invests primarily in money market instruments. If the issuers of these
instruments do not correct any Year 2000 problems in a timely manner, they
could experience problems in conducting their operations or in making payments
on their securities, which could cause the value of these securities to de-
cline. Issuers could experience three types of Year 2000 problems. First, if an
issuer's internal computer systems experience Year 2000 problems, this could
disrupt an issuer's operations (such as its ability to collect local taxes or
fees). Second, an issuer may rely on other parties for the payments that sup-
port its debt service, such as servicers that collect mortgage or student loan
payments, and those third parties may have Year 2000 problems that interfere
with their ability to forward payments to the issuer. Third, an issuer may have
mechanical problems in sending payments to its securities holders.
Nuveen Advisory is obtaining information about the Year 2000 readiness of the
issuers of its portfolio securities as part of its ongoing surveillance of the
creditworthiness of those issuers.
Portfolio Securities
The various securities in which the Fund intends to invest are described in the
Prospectus. The following is a more complete description of certain securities
in which the Fund may invest:
S-4
<PAGE>
Municipal Obligations.
The Fund invests in debt obligations issued by states, cities and local author-
ities to obtain funds for various public purposes, such as airports, highways,
housing, hospitals, mass transportation, water and sewer works, and include in-
dustrial development bonds and pollution control bonds. The two principal clas-
sifications of these securities (sometimes called Municipal Obligations) are
"general obligation" and "revenue" bonds. General obligation bonds are secured
by the issuer's pledge of its full faith, credit and taxing power for the pay-
ment of principal and interest. Revenue bonds are payable only from the reve-
nues derived from a particular facility or class of facilities or, in some
cases, from the proceeds of a special excise or other specific revenue source.
Industrial development and pollution control bonds are in most cases revenue
bonds and do not generally constitute the pledge of the credit or taxing power
of the issuer of such bonds.
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 governmen-
tal 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 or 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 ex-
tent permitted under its investment policies and limitations. Such notes may be
issued for different purposes and with different security than those mentioned
above.
The yields on Municipal Obligations are dependent on a variety of factors, in-
cluding the condition of the general money market and the Municipal Obligation
market, the size of a particular offering, the maturity of the obligation and
the rating of the issue. The ratings of Moody's and S&P represent their opin-
ions as to the quality of the Municipal Obligations which they undertake to
rate. It should be emphasized, however, that ratings are general and are not
absolute standards of quality. Consequently, Municipal Obligations with the
same maturity, coupon and rating may have different yields while obligations of
the same maturity and coupon with different ratings may have the same yield.
The market value of outstanding Municipal Obligations will vary with changes in
prevailing interest rate levels and as a result of changing evaluations of the
ability of their issuers to meet interest and principal payments.
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 al-
ternative minimum tax. The Fund will invest primarily in California Municipal
Obligations that are issued
S-5
<PAGE>
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 Cali-
fornia personal income taxes.
The Fund may not invest more than 10% of its net assets in California Municipal
Obligations issued within certain U.S. possessions or territories.
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.
Industrial Development Bonds (IDBs) and Pollution Control Bonds (PCBs) are is-
sued by or on behalf of public authorities to finance various privately-rated
facilities. Typically these bonds are included within the term Municipal Obli-
gation if the interest paid thereon is exempt from federal income tax.
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.
S-6
<PAGE>
Variable and Floating Rate Instruments-certain money market instruments may
carry variable or floating rates of interest. Such instruments bear interest at
rates which are not fixed, but which vary with changes in specified market
rates or indices, such as a bank prime rate or a tax-exempt money market index.
Variable rate notes are adjusted to current interest rate levels at certain
specified times, such as every 30 days, as set forth in the instrument. A
floating rate note adjusts automatically whenever there is a change in its base
interest rate adjustor, e.g., a change in the prime lending rate on specified
interest rate indices. Typically such instruments carry demand features permit-
ting the Money Market Fund to redeem at par upon specified notice.
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 re-
deem 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 mon-
itor on an ongoing basis the pricing, quality and liquidity of such instruments
and will similarly monitor the ability of an issuer of a demand instrument, in-
cluding those supported by bank letters of credit or guarantees, to pay princi-
pal and interest on demand. Although the ultimate maturity of such variable
rate obligations may exceed 397 days, the Fund will treat the maturity of each
variable rate demand obligation, for purposes of computing its dollar weighted
average fund maturity, as the longer of (i) the notice period required before
the Fund is entitled to payment of the principal amount through demand, or (ii)
the period remaining until the next interest rate adjustment.
The Fund may also obtain standby commitments with respect to Municipal Obliga-
tions. Under a standby commitment (often referred to as a put), the party issu-
ing the commitment agrees to purchase at the Fund's option the Municipal Obli-
gation at an agreed-upon price on certain dates or within a specific period.
Since the value of a standby commitment depends in part upon the ability of the
issuing party to meet its purchase obligations thereunder, the Fund will enter
into standby commitments only with parties which have been evaluated by Nuveen
Advisory and, in the opinion of Nuveen Advisory, present minimal credit risks.
The amount payable to the Fund upon its exercise of a standby commitment would
be (1) the acquisition cost of the Municipal Obligations (excluding any accrued
interest that the Fund paid on acquisition), less any amortized market premium
or plus any amortized market or original issue discount during the period the
Fund owned the security, plus (2) all interest accrued on the security since
the last interest payment date during the period the security was owned by the
Fund. The Fund's right to exercise standby commitments held by it will be un-
conditional and unqualified. The acquisition of a standby commitment will not
affect the valuation of the underlying security, which will continue to be val-
ued in accordance with the amortized cost method. The standby commitment itself
will be valued at zero in determining net asset value. The Fund may purchase
standby commitments for cash or pay a higher price for fund securities which
are acquired subject to such a commitment (thus reducing the yield to maturity
otherwise available for the same securities). The maturity of a Municipal Obli-
gation purchased by the Fund will not be considered shortened by any standby
commitment to which such security is subject. Although the Fund's rights under
a standby commitment would not be transferable, the Fund could sell Municipal
Obligations which were subject to a standby commitment to a third party at any
time.
S-7
<PAGE>
When-Issued Securities as described in the Prospectus, the Fund may purchase
and sell securities on a when-issued or delayed delivery basis. When-issued and
delayed delivery transactions arise when securities are purchased or sold with
payment and delivery beyond the regular settlement date (when-issued
transactions normally settle within 15-45 days). On such transactions the
payment obligation and the interest rate are fixed at the time the buyer enters
into the commitment. The commitment to purchase securities on a when-issued or
delayed delivery basis may involve an element of risk because the value of the
securities is subject to market fluctuation, no interest accrues to the
purchaser prior to settlement of the transaction, and at the time of delivery
the market value may be less than cost. At the time the Fund makes the
commitment to purchase a Municipal Obligation on a when-issued or delayed
delivery basis, it will record the transaction and reflect the amount due and
the value of the security in determining its net asset value. Likewise, at the
time the Fund makes the commitment to sell a Municipal Obligation on a delayed
delivery basis, it will record the transaction and include the proceeds to be
received in determining its net asset value; accordingly, any fluctuations in
the value of the Municipal Obligation sold pursuant to a delayed delivery
commitment are ignored in calculating net asset value so long as the commitment
remains in effect. The Fund will also maintain designated readily marketable
assets at least equal in value to commitments to purchase when-issued or
delayed delivery securities, such assets to be segregated by the Custodian
specifically for the settlement of such commitments. The Fund will only make
commitments to purchase Municipal Obligations on a when-issued or delayed
delivery basis with the intention of actually acquiring the securities, but the
Fund reserves the right to sell these securities before the settlement date if
it is deemed advisable. If a when-issued security is sold before delivery any
gain or loss would not be tax-exempt. The Fund commonly engages in when-issued
transactions in order to purchase or sell newly-issued Municipal Obligations,
and may engage in delayed delivery transactions in order to manage its
operations more effectively.
Special Considerations Relating to California Securities
Because the Fund invests substantially all of its assets in California Securi-
ties, the Fund is therefore susceptible to political, economic or regulatory
factors affecting California issuers. These include the possible adverse ef-
fects of certain California constitutional amendments, legislative measures,
voter initiatives and other matters that are described below. The following in-
formation 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 accuracy 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 State-
ments for various California issues.
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.
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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 adjustments. This sys-
tem has resulted in widely varying amounts of tax on similarly situated proper-
ties. Several lawsuits have been filed challenging the acquisition-based as-
sessment 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 govern-
mental unit to give two-thirds approval to levy any "special tax." Court deci-
sions, 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 Constitution, 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.
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Article XIIID contains several new provisions making it generally more diffi-
cult for local agencies to levy and maintain "assessments" for municipal serv-
ices and programs. Article XIIID also contains several new provisions affect-
ing "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, imposed 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 require-
ments prohibiting, among other things, fees and charges which generate reve-
nues 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 collection services (or
fees for electrical and gas service, which are not treated as "property relat-
ed" for purposes of Article XIIID), no property related fee or charge may be
imposed or increased without majority approval by the property owners subject
to the fee or charge or, at the option of the local agency, 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 of local governments, and for this reason, some ratings of California cit-
ies 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.
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The appropriations limit for each year is adjusted annually to reflect changes
in cost of living and population, and any transfers of service responsibilities
between government units. The definitions for such adjustments were liberalized
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 govern-
ments may by voter approval exceed their spending limits for up to four years.
During fiscal year 1986-87, State receipts from proceeds of taxes exceeded its
appropriations limit by $1.1 billion, which was returned to taxpayers. Since
that year, appropriations subject to limitation have been under the State lim-
it. 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 Ar-
ticles on California Municipal Obligations or on the ability of the State or
local governments to pay debt service on such California Municipal Obligations.
It is not possible, at the present time, to predict the outcome of any pending
litigation with respect to the ultimate scope, impact or constitutionality 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 obliga-
tions. Future initiatives or legislative changes in laws or the California Con-
stitution may also affect the ability of the State or local issuers to repay
their obligations.
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 public
school system and public institutions of higher education. Under the California
Constitution, debt service on outstanding general obligation bonds is the sec-
ond charge to the General Fund after support of the public school system and
public institutions of higher education. As of June 30, 1997, the State had
outstanding approximately $17.95 billion of long-term general obligation 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 sup-
ported by the State General Fund. The State also had about $7.5 billion of au-
thorized and unissued general obligation bonds. In FY 1996-97, debt service on
general obligation bonds and lease purchase bonds was approximately 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.
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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 into
balance and to close large "budget gaps" which were identified. The Legisla-
tive 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.
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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.
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.
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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 1999-2000 Budget. On January 9, 1999, the Governor released his pro-
posed budget for FY 1999-2000. Assuming continuing strength in the economy, the
Governor projects General Fund revenues (including transfers) to be [$55.4]
billion and proposes expenditures to be [$55.4] billion, to leave a budget re-
serve in the SFEU of [$296] million at June 30, 2000. 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
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would overturn several parts of the state's recent budget compromises. The mat-
ters 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 reductions
in certain aid programs. To reduce State General Fund support for school dis-
tricts, the 1992-93 and 1993-94 Budget Acts caused local governments to trans-
fer $3.9 billion of property tax revenues to school districts, representing
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 Article 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 as-
sistance 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 rural county
(Butte) publicly announced that it might enter bankruptcy proceedings in August
1990, although such plans were put off after the Governor approved legislation
to provide additional funds for the county. Other counties have also indicated
that their budgetary condition is extremely grave. Los Angeles County, the
largest in the State, was forced to make significant cuts in services and per-
sonnel, particularly in the health care system, in order to balance its budget
in 1995-96 and 1996-97. Los Angeles County's debt was downgraded 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 reduced county services and
personnel, and faces strict financial conditions following 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
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developed within a few years after issuance. In the event of such reduction or
slowdown, 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
securing these bonds are not the personal liability of the owners of the prop-
erty assessed, the lien on the property is the only security for the bonds.
Moreover, in most cases the issuer of these bonds is not required to make pay-
ments on the bonds in the event of delinquency in the payment of assessments or
taxes, 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 certificates 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
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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 have obtained earthquake insurance coverage at reasonable rates; (ii)
an insurer to perform on its contracts of insurance in the event of widespread
losses; or (iii) the federal or State government to appropriate sufficient
funds within their respective budget limitations.
Taxable Investments
Taxable investments (sometimes called "Temporary Investments") include obliga-
tions of the United States Government, its agencies or instrumentalities; debt
securities of issuers having, at the time of purchase, a quality rating within
the two highest grades by either Moody's Investors Service, Inc. ("Moody's") or
Standard and Poor's Corporation ("S&P") (Aaa or Aa, or AAA or AA, respective-
ly); commercial paper rated in the highest grade by either of such rating serv-
ices (Prime-1 or A-1, respectively); certificates of deposit of domestic banks
with assets of $1 billion or more; and municipal securities and U.S. Government
obligations subject to short-term repurchase agreements.
Subject to the limitation described in the Prospectus, the Funds may invest in
the following taxable investments:
U.S. Government Direct Obligations--issued by the United States Treasury and
include bills, notes and bonds.
- -- Treasury bills are issued with maturities of up to one year. They are issued
in bearer form, are sold on a discount basis and are payable at par value at
maturity.
- -- Treasury notes are longer-term interest-bearing obligations with original
maturities of one to seven years.
- -- Treasury bonds are longer-term interest-bearing obligations with original
maturities from five to thirty years.
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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 Bank, Federal Intermediate
Credit Banks, Federal Home Loan Banks, Federal National Mortgage Association,
Government National Mortgage Association, Export-Import Bank of the United
States and Tennessee Valley Authority. Issues of these agencies, while not di-
rect obligations of the United States Government, are either backed by the
full faith and credit of the United States or are guaranteed by the Treasury
or supported by the issuing agencies' right to borrow from the Treasury. There
can be no assurance that the United States Government itself will pay interest
and principal on securities as to which it is not so legally obligated.
Certificates of Deposits (CDs)--A certificate of deposit is a negotiable in-
terest-bearing instrument with a specific maturity. CDs are issued by banks in
exchange for the deposit of funds and normally can be traded in the secondary
market, prior to maturity. The Funds will only invest in U.S. dollar denomi-
nated CDs issued by U.S. banks with assets of $1 billion or more.
Commercial Paper--Commercial paper is the term used to designate unsecured
short-term promissory notes issued by corporations. Maturities on these issues
vary from a few to 397 days. Commercial paper may be purchased from U.S. cor-
porations.
Other Corporate Obligations--The Funds may purchase notes, bonds and deben-
tures 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
interest.
Repurchase Agreements--A repurchase agreement is a contractual agreement
whereby the seller of securities 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. Repur-
chase agreements are considered to be loans collateralized by the underlying
security that is the subject of the repurchase contract. The Funds will only
enter into repurchase agreements with dealers, domestic banks or recognized
financial institutions that in the opinion of Nuveen Advisory present minimal
credit risk. The risk to the Funds 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 in-
terest. In the event of default, the collateral may be sold but the Funds
might incur a loss if the value of the collateral declines, and might incur
disposition costs or experience delays in connection with liquidating the col-
lateral. In addition, if bankruptcy proceedings are commenced with respect to
the seller of the security, realization upon the collateral by the Funds may
be delayed or limited. Nuveen Advisory will monitor the value of the collat-
eral at the time the transaction is entered into and at all times subsequent
during the term of the repurchase agreement in an effort to determine that the
value always equals or exceeds the agreed-upon repurchase price. In the event
the value of the collateral declines below the repurchase price, Nuveen Advi-
sory will demand additional collateral from the issuer to increase the value
of the collateral to at least that of the repurchase price.
Variable and Floating Rate Investments--See description on page 7.
S-18
<PAGE>
Ratings of Investments
The two highest ratings of Moody's for municipal securities are Aaa and Aa. Mu-
nicipal securities rated Aaa are judged to be of the "best quality." The rating
of Aa is assigned to municipal securities which are of "high quality by all
standards," but as to which margins of protection or other elements make long-
term risks appear somewhat larger than in Aaa rated municipal securities. The
Aaa and Aa rated municipal securities comprise what are generally known as
"high grade bonds." Moddy's bond rating symbols may contain numerical modifiers
of a generic rating classification. The modifier 1 indicates that the bond
ranks at the high end of its category; the modifier 2 indicates a mid-range
ranking, and the modifier 3 indicates that the issue ranks in the lower end of
its generic rating category.
The two highest ratings of S&P for municipal securities are AAA and AA. Munici-
pal securities rated AAA have an extremely strong capacity to pay principal and
interest. The rating of AA indicates that capacity to pay principal and inter-
est is very strong and such bonds differ from AAA issues only in small degree.
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 and VMIG-2 in the case of vari-
able instruments, and SP-1 and SP-2, respectively. Obligations designated MIG-1
or VMIG-1 are the best quality enjoying strong protection from established 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 des-
ignation SP-1 indicates a very strong or strong capacity to pay principal 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 of return of funds employed; conservative cap-
italization structures with moderate reliance on debt and ample asset protec-
tion; board 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 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 obligations from the Fund, but
Nuveen Advisory will consider such an event in its determination of whether the
Fund should continue to hold such obligation.
S-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 seven directors of the Fund,
one of whom is an "interested person" (as that term is defined in the Invest-
ment Company Act of 1940). The names and business addresses of the directors
and officers of the Fund and their ages and principal occupations and other af-
filiations during the past five years are set forth below.
<TABLE>
- --------------------------------------------------------------------------------
<CAPTION>
Positions and Principal 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 of the Board of
333 West Wacker Drive and Director the Funds (since July
Chicago, IL 60606 1996); Trustee and
President of the Funds
advised by Nuveen
Institutional Advisory
Corp. (since July 1996);
Chairman (since July
1996), Director, and
previously Executive
Vice President, of The
John Nuveen Company,
John Nuveen & Co.,
Nuveen Advisory Corp.
and Nuveen Institutional
Advisory Corp.; Director
(since 1996) of
Institutional Capital
Corporation; Chairman
and Director of Nuveen
Asset Management, Inc.;
Chairman and Director of
Rittenhouse Financial
Services Inc. (since
1999).
- --------------------------------------------------------------------------------
Robert P. Bremner 58 Director Private Investor and
3725 Huntington Street, N.W. Management Consultant.
Washington, D.C. 20015
- --------------------------------------------------------------------------------
Lawrence H. Brown 64 Director Retired (August 1989) as
201 Michigan Avenue Senior Vice President of
Highwood, IL 60040 The Northern Trust
Company (banking and
trust industry).
- --------------------------------------------------------------------------------
Anne E. Impellizzeri 66 Director Executive Director
3 West 29th Street (since 1998) of Manitoga
New York, NY 10001 (center for Russell
Wright's design/home and
landscape); formerly
President and Chief
Executive Officer of
Blanton-Peale,
Institutes of Religion
and Health (a training
and counseling
organization).
- --------------------------------------------------------------------------------
Peter R. Sawers 66 Director Adjunct Professor of
22 The Landmark Business and Economics,
Northfield, IL 60093 University of Dubuque,
Iowa; Adjunct Professor,
Lake Forest Graduate
School of Management,
Lake Forest, Illinois;
Chartered Financial
Analyst; Certified
Management Consultant.
- --------------------------------------------------------------------------------
William J. Schneider 54 Director Senior Partner and Chief
4000 Miller-Valentine Ct. Operating Officer,
P.O. Box 744 Miller-Valentine
Dayton, OH 45401 Partners, Vice
President, Miller-
Valentine Group
(commercial real
estate); Member
Community Advisory
Board, National City
Bank, Dayton, Ohio.
</TABLE>
- --------------------------------------------------------------------------------
S-20
<PAGE>
<TABLE>
- ---------------------------------------------------------------------------------------
<CAPTION>
Principal Occupations
Name and Address Age Positions and Offices with Fund During Past Five Years
- ---------------------------------------------------------------------------------------
<C> <C> <C> <S>
Judith M. Stockdale 51 Director Executive Director,
35 E. Wacker Drive Gaylord and Dorothy
Suite 2600 Donnelley Foundation, a
Chicago, IL 60601 private family
foundation (since 1994);
prior thereto, Executive
Director, Great Lakes
Protection Fund (from
1990 to 1994).
- --------------------------------------------------------------------------------
Alan G. Berkshire+ 38 Vice President and Asst. Secretary Vice President and
333 West Wacker Drive since 1998 General Counsel (since
Chicago, IL 60606 September 1997) and
Secretary (since May
1998) of The John Nuveen
Company, John Nuveen &
Co. Incorporated, Nuveen
Advisory Corp. and
Nuveen Institutional
Advisory Corp.; prior
thereto, partner in the
law firm of Kirkland &
Ellis.
- --------------------------------------------------------------------------------
Peter H. D'Arrigo 31 Vice President and Treasurer Vice President of John
333 West Wacker Drive since 1999 Nuveen & Co.
Chicago, IL 60606 Incorporated (since
January 1999), prior
thereto. Assistant Vice
President (from January
1997); formerly,
Associate of John Nuveen
& Co. Incorporated;
Chartered Financial
Analyst.
- --------------------------------------------------------------------------------
Michael S. Davern+ 41 Vice President since 1997 Vice President of Nuveen
333 West Wacker Drive Advisory Corp. (since
Chicago, IL 60606 January 1997); prior
thereto, Vice President
and Portfolio Manager of
Flagship Financial, Inc.
(from September 1991 to
January 1997).
- ---------------------------------------------------------------------------------------
Lorna C. Ferguson+ 53 Vice President since 1998 Vice President of John
333 West Wacker Drive Nuveen & Co.
Chicago, IL 60606 Incorporated; Vice
President of Nuveen
Advisory Corp. and
Nuveen Institutional
Advisory Corp. (since
January 1998).
- ---------------------------------------------------------------------------------------
William M. Fitzgerald+ 35 Vice President since 1996 Vice President of Nuveen
333 West Wacker Drive Advisory Corp. (since
Chicago, IL 60606 December 1995); prior
thereto, Assistant Vice
President of
Nuveen Advisory Corp.
(from September 1992 to
December 1995);
Chartered Financial
Analyst.
- ---------------------------------------------------------------------------------------
Stephen D. Foy+ 44 Vice President and Controller Vice President of John
333 West Wacker Drive since 1998 Nuveen & Co.
Chicago, IL 60606 Incorporated and (since
May 1998) The John
Nuveen Company;
Certified Public
Accountant.
- --------------------------------------------------------------------------------
J. Thomas Futrell+ 43 Vice President since 1991 Vice President of Nuveen
333 West Wacker Drive Advisory Corp.;
Chicago, IL 60606 Chartered Financial
Analyst.
- ---------------------------------------------------------------------------------------
Richard A. Huber+ 36 Vice President since 1997 Vice President of Nuveen
333 West Wacker Drive Institutional Advisory
Chicago, IL 60606 Corp. (since March 1998)
and Nuveen Advisory
Corp. (since January
1997); prior thereto,
Vice President and
Portfolio Manager of
Flagship Financial, Inc.
- ---------------------------------------------------------------------------------------
Steven J. Krupa+ 41 Vice President since 1990 Vice President of Nuveen
333 West Wacker Drive Advisory Corp.
Chicago, IL 60606
</TABLE>
- --------------------------------------------------------------------------------
S-21
<PAGE>
<TABLE>
- -----------------------------------------------------------------------------------
<CAPTION>
Positions and Principal Occupations
Name and Address Age Offices with Fund During Past Five Years
- -----------------------------------------------------------------------------------
<C> <C> <C> <S>
Larry W. Martin+ 47 Vice President since 1993 and Vice President,
333 West Wacker Drive Asst. Secretary since 1998 Assistant Secretary and
Chicago, IL 60606 Assistant General
Counsel of John Nuveen &
Co. Incorporated; Vice
President and Assistant
Secretary of Nuveen
Advisory Corp. and
Nuveen Institutional
Advisory Corp.,
Assistant Secretary of
The John Nuveen Company
and (since January 1997)
Nuveen Asset Management
Inc.
- -----------------------------------------------------------------------------------
Edward F. Neild, IV+ 33 Vice President since 1996 Vice President of Nuveen
333 West Wacker Drive Advisory Corp. and
Chicago, IL 60606 Nuveen Institutional
Advisory Corp. (since
September 1996); prior
thereto, Assistant Vice
President of Nuveen
Advisory Corp. (from
December 1993 to
September 1996) and
Nuveen Institutional
Advisory Corp. (from May
1995 to September 1996);
Chartered Financial
Analyst.
- -----------------------------------------------------------------------------------
Stephen S. Peterson+ 41 Vice President since 1997 Vice President, (since
333 West Wacker Drive September 1997).
Chicago, IL 60606 Assistant Vice President
(from September 1996 to
September 1997), and
Portfolio Manager prior
thereto, of Nuveen
Advisory Corp.;
Chartered Financial
Analyst.
- -----------------------------------------------------------------------------------
Stuart W. Rogers+ 42 Vice President since 1997 Vice President of John
333 West Wacker Drive Nuveen & Co.
Chicago, IL 60606 Incorporated.
- -----------------------------------------------------------------------------------
Thomas C. Spalding Jr.+ 47 Vice President since 1980 Vice President of Nuveen
333 West Wacker Drive Advisory Corp. and
Chicago, IL 60606 Nuveen Institutional
Advisory Corp.;
Chartered Financial
Analyst.
- -----------------------------------------------------------------------------------
William S. Swanson+ 33 Vice President since 1998 Vice President of John
333 West Wacker Drive Nuveen & Co.
Chicago, IL 60606 Incorporated (since
October 1997); Assistant
Vice President (from
September 1996 to
October 1997) and
formerly, Associate;
Chartered Financial
Analyst.
- -----------------------------------------------------------------------------------
Gifford R. Zimmerman+ 42 Vice President since 1993 and Vice President,
333 West Wacker Drive Secretary since 1998 Assistant Secretary and
Chicago, IL 60606 Associate General
Counsel, formerly
Assistant General
Counsel (since September
1997) of John Nuveen &
Co. Incorporated; Vice
President and Assistant
Secretary of Nuveen
Advisory Corp. and
Nuveen Institutional
Advisory Corp.;
Assistant Secretary of
The John Nuveen Company
(since May 1994);
Chartered Financial
Analyst.
</TABLE>
- --------------------------------------------------------------------------------
- --------
* Mr. Schwertfeger is an interested person of the Fund.
+ Person is an affiliate of the Fund and an affiliate of the adviser or prin-
cipal underwriter.
S-22
<PAGE>
Timothy R. Schwertfeger and Peter R. Sawers serve as members of the Executive
Committee of the Board of Directors. The Executive Committee, which meets be-
tween regular meetings of the Board of Directors, is authorized to exercise all
of the powers of the Board of Directors provided that the scope of the powers
of the Executive Committee, unless otherwise specifically authorized by the
full Board, shall be limited to (i) emergency matters where assembling the full
Board in a timely manner is impracticable (and in which event management would
take all reasonable steps to quickly notify the individual Board members of the
actions taken by the Executive Committee), or (ii) matters of an administrative
or ministerial nature.
The directors of Nuveen California Tax-Free Fund, Inc. are directors or trust-
ees, as the case may be, of 32 Nuveen open-end fund portfolios and of 52 Nuveen
closed-end funds.
The following table sets forth compensation paid by the Fund during the fiscal
year ended [February 28, 1999] to each of the directors. The Fund has no re-
tirement or pension plans. The officers and directors affiliated with Nuveen
serve without any compensation from the Fund.
<TABLE>
<CAPTION>
Total Compensation
from the Nuveen
Name of Board Member California Fund Family of Funds
- --------------------------------------------------------------------------------
<S> <C> <C>
Anthony T. Dean*............................. $ 0 $ 0
Timothy R. Schwertfeger...................... $ 0 $ 0
Robert P. Bremner............................ $596.58 $71,500.00
Lawrence H. Brown............................ $642.40 $79,000.00
Anne E. Impellizzeri......................... $596.68 $71,500.00
Peter R. Sawers.............................. $596.58 $72,000.00
William J. Schneider......................... $596.58 $71,500.00
Judith M. Stockdale.......................... $596.58 $72,000.00
</TABLE>
- --------
*Former director, retired February, 1999.
Each director who is not affiliated with Nuveen or Nuveen Advisory receives a
fee. The Fund requires no employees other than its officers, all of whom are
compensated by Nuveen.
On [May 19, 1999], 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, 1999, owned of record or was known by Nuveen California Tax-
Free Fund, Inc. to own of record or beneficially 5% the Fund. [to be inserted]
S-23
<PAGE>
INVESTMENT ADVISER AND INVESTMENT MANAGEMENT AGREEMENT
Nuveen Advisory Corp. acts as investment adviser for and manages the investment
and reinvestment of the Fund's assets. Nuveen Advisory also administers the
Fund's business affairs, provides office facilities and equipment and certain
clerical, bookkeeping and administrative services, and permits any of its offi-
cers or employees to serve without compensation as trustees or officers of the
Fund if elected to such positions.
Pursuant to an investment management agreement between Nuveen Advisory and the
Fund, the Fund has agreed to pay annual management fees at the rates set forth
below, which are based on the Fund's average daily net asset value:
<TABLE>
<CAPTION>
Average Daily Net Asset
Value Management Fee
- ------------------------------------------
<S> <C>
For the first $125 million 0.4000 of 1%
For the next $125 million 0.3875 of 1%
For the next $250 million 0.3750 of 1%
For the next $500 million 0.3625 of 1%
For the next $1 billion 0.3500 of 1%
For assets over $2 billion 0.3250 of 1%
</TABLE>
Through December 31, 1999, Nuveen Advisory has undertaken to reimburse Fund
expenses in an amount necessary to limit total operating expenses to .55 of 1%
of the Fund's daily net asset value. Thereafter, Nuveen Advisory may chose to
modify, continue or discontinue these reimbursements at its sole discretion.
Before June 1999 and pursuant to an investment management agreement between
Nuveen Advisory and the Fund, the Fund agreed to pay annual management fees at
the rates set forth below, which are based on the Fund's average daily net as-
set value:
<TABLE>
<CAPTION>
Average Daily Net Asset
Value Management Fees
- -------------------------------------------
<S> <C>
For the first $500 million .4000 of 1%
For the next $500 million .3750 of 1%
For assets over $1 billion .3500 of 1%
</TABLE>
S-24
<PAGE>
For periods before June 1999, Nuveen Advisory had agreed to waive all or a
portion of its management fee or reimburse certain expenses of the Fund in or-
der to prevent total operating expenses of (including Nuveen Advisory's man-
agement 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 could also voluntarily agree to reimburse additional expenses
from time to time, which could be terminated at any time in its discretion.
For the last three fiscal years, the Fund paid net management fees to Nuveen
Advisory as follows:
<TABLE>
<CAPTION>
Management Fees Net of
Expense
Reimbursement Paid to Fee Waivers and Expense
Nuveen Advisory for the Reimbursements for the
Year Ended Year Ended
----------------------- -----------------------
2/28/97 2/28/98 2/28/99 2/28/97 2/28/98 2/28/99
--------------
<S> <C> <C> <C> <C> <C> <C>
665,655 539,739 70,133 82,256
</TABLE>
Nuveen Advisory is a wholly owned subsidiary of John Nuveen & Co. Incorporated
("Nuveen"), the Fund's principal underwriter. In 1961, Nuveen began sponsoring
the Nuveen Tax-Exempt Unit Trust and since that time has issued more than [$37
billion] in taxable and tax-exempt unit trusts. In addition, Nuveen open-end
and closed-end funds held approximately [$38 billion] in securities under man-
agement as of the date of this Statement. Over 1,000,000 individuals have in-
vested to date in Nuveen's funds and trusts. Founded in 1898, Nuveen is a sub-
sidiary 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 insur-
ance 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 ad-
vantage of, the 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 trans-
actions.
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.
S-25
<PAGE>
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 ob-
tainable, it will be the practice of the Fund to select dealers which, in ad-
dition, furnish research information (primarily credit analyses of issuers and
general economic reports) and statistical and other services to Nuveen Adviso-
ry. It is not possible to place a dollar value on information and statistical
and other services received from dealers. Since it is only supplementary to
Nuveen Advisory's own research efforts, the receipt of research information 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 regard 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
securities whenever decisions are made to purchase or sell securities by the
Fund and one or more of such other clients simultaneously. In making such al-
locations the main factors to be considered will be the respective investment
objectives of the Fund and such other clients, the relative size of portfolio
holdings of the same or comparable securities, the availability of cash for
investment by the Fund and such other
clients, the size of investment commitments generally held by the Fund and
such other clients and
opinions of the persons responsible for 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 or-
ganization will outweigh any disadvantage that may arise from exposure to si-
multaneous transactions.
Under the Investment Company Act of 1940, the Fund may not purchase portfolio
securities from any underwriting syndicate of which Nuveen is a member except
under certain limited conditions set forth in Rule 10f-3. The Rule sets forth
requirements relating to, among other things, the type of securities purchased
by the Fund and the amount of securities which may be purchased in any one is-
sue. In addition, purchases of securities made pursuant to the terms of the
Rule must be approved at least quarterly by the Board of Directors, including
a majority of the directors who are not interested persons of the Fund.
NET ASSET VALUE
As stated in the Prospectus, the net asset value of the shares of the Fund
will be determined separately for each class of the Fund's shares by The Chase
Manhattan Bank, the Fund's custodian, as of 12:00 noon, Eastern Time, (1) on
each day on which the Federal Reserve Bank of Boston is normally open and (2)
on any day during which there is sufficient degree of trading in the Fund's
portfolio securities that
S-26
<PAGE>
the current net asset value of the Fund shares might be materially affected by
such changes in the value of the portfolio securities. The Federal Reserve Bank
of Boston is not open and the Fund will similarly not be open on New Year's
Day, Martin Luther King's Birthday, Washington's Birthday, Good Friday, Memo-
rial Day, Independence Day, Labor Day, Columbus Day, Veteran's Day, Thanksgiv-
ing Day and Christmas Day. It is possible that changing circumstances during
the year will result in addition or deletions to the above lists. The net asset
value per share will be computed by dividing the value of the portfolio securi-
ties held by the Fund, plus cash or other assets, less liabilities, by the to-
tal number of shares outstanding at such time.
As stated in the Prospectus, the Fund will seek to maintain a net asset value
of $1.00 per share. In this connection, the Fund values its portfolio securi-
ties at their amortized cost, as permitted by the Securities and Exchange Com-
mission (the "Commission") under Rule 2a-7 under the Investment Company Act of
1940. This method does not take into account unrealized securities gains or
losses. It involves valuing an instrument 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 of the Fund may tend to be higher than a like computation made by a fund
with identical investments utilizing a method of valuation based upon market
prices and estimates of market prices for all of its portfolio instruments.
Thus, if the use of the amortized cost method by the Fund resulted in a lower
aggregate portfolio value on a particular day, a prospective investor in the
Fund would be able to obtain a somewhat higher yield than would result from an
investment in a fund utilizing solely market values, and existing investors in
the Fund would receive less investment income. The converse would apply in a
period of rising interest rates.
The Fund, as a condition to the use of amortized cost and the maintenance of
its per share net asset value of $1.00, must maintain a dollar-weighted average
portfolio maturity of 90 days or less, only purchase instruments having remain-
ing maturities of 397 days or less, and invest only in securities determined to
be of high quality with minimal credit risks. The Fund may invest in variable
and floating rate instruments even if they carry stated maturities in excess of
397 days, upon certain conditions contained in rules and regulations issued by
the Securities and Exchange Commission under the Investment Company Act of
1940, but will do so only if there is a secondary market for such instruments
or if they carry demand features, permissible under rules of the Commission for
money market funds, to recover the full principal amount thereof upon specified
notice at par, or both.
The Board of Trustees, pursuant to Rule 2a-7, has established procedures de-
signed to stabilize, to the extent reasonably possible, the Fund's price per
share as computed for the purpose of sales and redemptions at $1.00. Such pro-
cedures will include review of the Fund's portfolio holdings by the Board of
Trustees, at such intervals as it may deem appropriate, to determine whether
the net asset value calculated by using available market quotations or market
equivalents deviates from $1.00 per share based on amortized cost. Market quo-
tations and market equivalents used in such review may be obtained from a pric-
ing agent approved by the Board of Trustees. The Board has selected Nuveen Ad-
visory to act as pricing agent, but in the future may select an independent
pricing service to perform this function. In serving as pricing agent, Nuveen
Advisory will follow guidelines adopted by the Board, and the Board
S-27
<PAGE>
will monitor Nuveen Advisory to see that the guidelines are followed. The pric-
ing agent will value the Fund's investment based on methods which include con-
sideration of yield or prices of municipal obligations of comparable quality,
coupon, maturity, and type; indications as to values from dealers; and general
market conditions. The pricing agent may employ electronic data processing
techniques and/or a matrix system to determine valuations. The extent of any
deviation between the Fund's net asset value based on the pricing agent's mar-
ket valuation and $1.00 per share based on amortized cost will be examined by
the Board of Trustees. If such deviation exceeds 1/2 of 1%, the Board of Trust-
ees will promptly consider what action, if any, will be initiated. In the event
the Board of Trustees determines that a deviation exists which may result in
material dilution or other unfair results to investors or existing sharehold-
ers, it has agreed to take such corrective action as it regards as necessary
and appropriate, including the sale of portfolio instruments prior to maturity
to realize capital gains or losses or to shorten average portfolio maturity.
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).
S-28
<PAGE>
The Fund also intends to satisfy conditions that will enable it to designate
certain distributions 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 invest-
ments (such as certificates of deposit, commercial paper and obligations of the
United States Government, its agencies and instrumentalities) and net short-
term capital gains realized by the Fund, if any, will be taxable to sharehold-
ers as ordinary income whether received in cash or additional shares. If the
Fund purchases a security at a market discount, any gain realized by the Fund
upon sale or redemption of the securities will be treated as a taxable interest
income to the extent such gain does not exceed the market discount, and any
gain realized in excess of the market discount will be treated as a capital
gain. Any net long-term capital gains realized by the Fund and distributed to
shareholders in cash or in additional shares will be taxable to shareholders as
long-term capital gains regardless of the length of time investors have owned
shares of the Fund. The Fund does not expect to realize significant long-term
capital gains. Because the taxable portion of the Fund's investment income con-
sists primarily of interest, none of its dividends, whether or not treated as
exempt-interest dividends, is expected to qualify under the Internal Revenue
Code for the dividends received deductions for corporations.
If the Fund has both tax-exempt and taxable income, it will use the "average
annual" method for determining the designated percentage that is taxable income
and designate the use of such method within 60 days after the end of the Fund's
taxable year. Under this method, one designated percentage is applied uniformly
to all distributions made during the Fund's taxable year. The percentage of in-
come designated as tax-exempt for any particular distribution may be substan-
tially different from the percentage of the Fund's income that was tax-exempt
during the period covered by the distribution.
Although dividends generally will be treated as distributed when paid, divi-
dends declared in October, November or December, payable to shareholders of
record on a specified date in one of those months and paid during the following
January, will be treated as having been distributed by the Fund (and received
by the shareholders) on December 31.
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. The Fund intends to make
timely distributions in compliance with these requirements and consequently it
is anticipated that it generally will not be required to pay the excise tax.
S-29
<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 tax-exempt securities), and distributions to its shareholders out
of net interest income from tax-exempt securities or other investments, or out
of net capital gains, would be taxable to shareholders as ordinary dividend in-
come for federal income tax purposes to the extent of the Fund's available
earnings and profits.
The Fund may invest in the type of private activity bonds the interest on which
is not federally tax-exempt to persons who are "substantial users" of the fa-
cilities financed by such bonds or "related persons" of such "substantial us-
ers." Accordingly, the Funds may not be appropriate investments for a share-
holder who is considered either a "substantial user" or a "related person"
within the meaning of the Code. In general, a "substantial user" of a facility
financed from the proceeds of private activity bonds includes a "non-exempt
person who regularly uses a part of such facility in his trade or business."
"Related persons" are in general defined to include persons among whom there
exists a relationship either by family or business, which would result in a
disallowance of losses in transactions among them under various provisions of
the Code (or if they are members of the same controlled group of corporations
under the Code). This includes a partnership and each of its partners (includ-
ing their spouses and minor children) and an S corporation and each of its
shareholders (and their spouses and minor children). Various combinations of
these relationships may also constitute "related persons" under the Code. For
additional information, investors should consult their tax advisers before in-
vesting in the Fund.
Federal tax law imposes an alternative minimum tax with respect to both corpo-
rations and individuals. Interest on certain securities, such as bonds issued
to make loans for housing purposes or to private entities (but not for certain
tax-exempt organizations such as universities and non-profit hospitals), is in-
cluded as an item of tax preference in determining the amount of a taxpayer's
alternative minimum taxable income. To the extent that the Fund receives income
from securities subject to the alternative minimum tax, a portion of the divi-
dends paid by it, although otherwise exempt from federal income tax, will be
taxable to shareholders to the extent that their tax liability is determined
under the alternative minimum tax regime. The Fund will annually supply share-
holders with a report indicating the percentage of the Fund income attributable
to securities subject to the federal alternative minimum tax.
In addition, the alternative minimum taxable income for corporations is in-
creased by 75% of the difference between an alternative measure of income ("ad-
justed current earnings") and the amount otherwise determined to be the alter-
native minimum taxable income. Interest on all securities, and therefore all
distributions by the Fund that would otherwise be tax exempt, is included in
calculating a corporation's adjusted current earnings.
Individuals whose provisional income exceeds a base amount will be subject to
Federal income tax on up to one-half of their social security or railroad re-
tirement benefits. Provisional income currently includes adjusted gross income,
one-half of social security benefits and tax-exempt interest, including exempt-
interest dividends from the Fund. Individuals whose modified income exceeds an
adjusted base amount are required to include in gross income up to 85% of their
social security or railroad benefits.
S-30
<PAGE>
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.
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.
State Tax Matters
The following is based upon the advice of Morgan, Lewis & Bockius LLP, Washing-
ton, D.C., counsel to the Fund, and assumes that the Fund will be qualified as
a regulated investment company under Subchapter M of the Code 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
dividends which (1) are attributable to interest on any obligation of Califor-
nia or its political subdivisions or to interest on obligations of the United
States, its territories, possessions or instrumentalities that are exempt from
state taxation under federal law, and (2) are designated by the Fund as Cali-
fornia exempt-interest dividends in a written notice mailed to shareholders not
later than 60 days after the close of the Fund's taxable year. 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 incurred or con-
tinued 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.
However, the California alternative minimum tax does not include tax-exempt in-
terest as an item of tax preference.
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.
S-31
<PAGE>
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 be
retroactive with respect to Fund transactions. Shareholders are advised to con-
sult with their own tax advisers for more detailed information concerning Cali-
fornia tax matters.
PERFORMANCE INFORMATION
The historical performance of the Fund may be expressed in terms of "yield,"
"effective yield" or "taxable equivalent yield." The "yield " of the Fund re-
fers 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 investment would need to generate in order
to equal the series' yield on an after-tax basis for an investor in a stated
bracket) often the bracket with the highest marginal tax rate). A taxable
equivalent yield quotation for a given series will be higher than the yield or
the effective yield quotation for the series. The yield figures will fluctuate
over time. A comparison of tax-exempt and taxable equivalent yields is one ele-
ment to consider in making an investment decision. The Fund 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 taxable investments
such as corporate or U.S. Government bonds, bank CDs and money market accounts
or money market funds, each of which has investment characteristics that may
differ from those of the Fund. U.S. Government bonds, for example, are backed
by the full faith and credit of the U.S. Government and bank CDs and money mar-
ket accounts are insured by an agency of the federal government. Bank money
market accounts and money market funds provide stability of principal, but pay
interest at rates 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 Prospecuts.
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.
Yield is computed in accordance with a standard method prescribed by rules of
the Securities and Exchange Commission. Under that method, current yield is
based on a seven-day period and is computed as follows: the series' net invest-
ment income per share for the period is divided by the price per share (ex-
pected to remain constant at $1.00) at the beginning of the period, the result
(the "base period return") is divided by 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 in-
cludes its accrued interest income plus or minus amortized purchase discount or
premium less accrued expenses, but does not include realized capital gains or
losses or unrealized appreciation or depreciation of investments.
Effective yield is calculated by taking the base period return (computed as de-
scribed above) and calculating the effect of assumed compounding. The formula
for effective yield is: (base period return +1) 365/7
S-32
<PAGE>
- -1. Based on the seven-day period ended February 28, 1999, the yield and effec-
tive yield was % and %, respectively/1/.
Taxable equivalent yield is computed by dividing that portion of the the fund's
yield which is tax-exempt by 1 minus the stated combined federal and state in-
come tax rate and adding the result to that portion, if any, of the yield of
the fund that is not tax-exempt. Based upon (1) a combined 1999 federal and
California income tax of 45.2%, and (2) the yield for the fund as described
above for the seven-day period ended February 28, 1999, the taxable equivalent
yield for the fund for that period was [5.53]%.
Yield will fluctuate, and the publication of annualized yield quotations is not
a representation of what an investment in the fund will actually yield for any
given future period. Actual yields will depend not only on changes in interest
rates on money market instruments during the period in question, but also on
such matters as the expenses attributable to the fund.
In reports or other communications to shareholders or in advertising and sales
literature, the fund may compare its performance to that of other money market
mutual funds tracked by Lipper Analytical Services, Inc. ("Lipper"), by
Donoghue's Money fund Report ("Donoghue's") or similar services or by financial
publications such as Barron's, Changing Times, Forbes and Money Magazine. Per-
formance comparisons by these indexes, services or publications may rank mutual
funds over different periods of time by means of aggregate, average, year-by-
year or other types of performance figures. Lipper performance calculations in-
clude the reinvestment of all capital gain and income dividends for the periods
covered by the calculations. As reported by Donoghue's all investment results
represent total return (annualized results for the period net of management
fees and expenses) and one year investment results are effective annual yields
assuming reinvestment of dividends.
A comparison of tax-exempt and taxable equivalent yields is one element to con-
sider in making an investment decision. The fund may from time to time in its
advertising and sales materials compare its then current yields as of a recent
date with the yields on taxable investments such as corporate or U.S. Govern-
ment bonds and bank CDs or money market accounts, each of which has investment
characteristics that may differ from those of the fund. U.S. Government bonds,
for example, are backed by the full faith and credit of the U.S. Government,
and bank CDs and money market accounts are generally shorter term investments
insured by an agency of the federal government. Bank money market accounts and
money market funds provide stability of principal but pay interest at rates
which vary with the condition of the short-time taxable debt market.
- --------
1 Historical yield has been recalculated to reflect fund expenses as disclosed
in the fund's prospectus dated June 25, 1999, including a 12b-1 fee the im-
position of which will affect future performance. Before June 1999, the fund
offered three share classes. Returns reflect the performance of the Distri-
bution Series, adjusted for any differences between the fund's current fees
and those of the Distribution Series.
S-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 Fund occasionally may ad-
vertise its performance in similar tables using a different current tax rate
than that shown here. The tax rate shown here may be higher or lower than your
actual tax rate; a higher tax rate would tend to make the dollar amounts in the
table lower, while a lower tax rate would make the amounts higher. You should
consult your tax adviser to determine your actual tax rate.
Taxable Equivalent Yield Tables
The following tables show the 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 in-
come as a taxable investment.
S-34
<PAGE>
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 1999 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 al-
ternative minimum taxes and deduct any state income taxes paid on their federal
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 ef-
fect of the current federal tax limitations on itemized deductions and personal
exemptions, which were designed to phase out certain benefits of these deduc-
tions for higher income taxpayers. These limitations are subject to certain
maximums, which depend on the number of exemptions claimed and the total amount
of the taxpayer's itemized deductions. For example, the limitation on itemized
deductions will not cause a taxpayer to lose more than 80% of his allowable
itemized deductions, with certain exceptions. The 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 lower, 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 federal and California state marginal tax rates for joint taxpayers
with four personal exemptions.
<TABLE>
<CAPTION>
Tax-Free Yield
Federal Combined 2.00% 2.50% 3.00% 3.50% 4.00% 4.50% 5.00% 5.50%
Federal Adjusted State and
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
124,500-188,800 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
188,800-228,305 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>
S-35
<PAGE>
Combined federal and California marginal tax rates for single taxpayers with
one personal exemption.
<TABLE>
<CAPTION>
Tax-Free Yield
Federal Combined 2.00% 2.50% 3.00% 3.50% 4.00% 4.50% 5.00% 5.50%
Federal Adjusted State and
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 equal to Your tax-free investment may be less*
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 ad-
justed 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.
S-36
<PAGE>
ADDITIONAL INFORMATION ABOUT PURCHASES AND SALES
Exchange Privileges
You may exchange shares of the fund for the appropriate class of shares of any
other open-end management investment company with reciprocal exchange privi-
leges advised by Nuveen Advisory (the "Nuveen Funds"), into an identically reg-
istered account, provided that the Nuveen Fund into which shares are to be ex-
changed is offered in the shareholder's state of residence and that the shares
to be exchanged have been held by the shareholder for a period of at least 15
days. You may exchange fund shares by calling (800) 257-8787 or by mailing your
written request to our Transfer Agent. Shares of Nuveen Funds purchased subject
to a front-end sales charge may be exchanged for shares of the fund or any
other Nuveen Fund at the next determined net asset value without any front-end
sales charge. No CDSC otherwise applicable will be assessed on an exchange, and
the holding period of your investment will be carried over to the new fund for
purposes of determining any future CDSC. You may exchange Class B shares for
shares of a Nuveen money market fund. Shares of any Nuveen Fund purchased
through dividend reinvestment or through reinvestment of Nuveen Unit Trust dis-
tributions (and any dividends thereon) may be exchanged for Class A shares of
any Nuveen Fund without a front-end sales charge. Exchanges of shares with re-
spect to which no front-end sales charge has been paid will be made at the pub-
lic 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 Birth-
day, 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 in-
vestment requirement of the Nuveen Fund into which they are being exchanged.
Exchanges are made based on the relative dollar values of the shares involved
in the exchange, and will be effected by redemption of shares of the Nuveen
Fund held and purchase of the shares of the other Nuveen Fund. For federal in-
come tax purposes, any such exchange constitutes a sale and purchase of shares
and may result in capital gain or loss. Before exercising any exchange, you
should obtain the Prospectus for the Nuveen Fund into which shares are to be
exchanged and read it carefully. If the registration of the account for the
fund you are purchasing is not exactly the same as that of the fund account
from which the exchange is made, written instructions from all holders of the
account from which the exchange is being made must be received, with signatures
guaranteed by a member of an approved Medallion Guarantee Program or in such
other manner as may be acceptable to the fund. The exchange privilege may be
modified or discontinued at any time. If you do not wish to have telephone ex-
change privileges, you must indicate this in the "Telephone Services" section
of your Account Application or otherwise notify the Fund in writing of your
desire.
Additional Information
An account will be maintained for each shareholder of record in the fund by our
Transfer Agent. Share certificates will be issued only upon written request of
the shareholder to our Transfer Agent. No
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<PAGE>
certificates are issued for fractional shares. The fund reserves the right to
reject any purchase order and to waive or increase minimum investment require-
ments.
Confirmations of each purchase and redemption order as well as monthly state-
ments are sent to every shareholder. Master accounts also receive a monthly
summary report setting forth the share balance and dividends earned for the
month for each sub-account established under that master account.
To assist those institutions performing their own-sub-accounting, same day in-
formation as to the fund's daily per share income to seven decimal places and
the one-day yield to four decimal places are normally available by 3:30 p.m.,
Eastern Time.
A change in registration or transfer of shares held in the name of a
broker/dealer can only be effected by an order in good form from the
broker/dealer acting on behalf of the investor. Broker/dealers are encouraged
to open single master accounts. However, some broker/dealers may wish to use
our Transfer Agent's sub-accounting system to minimize their internal record-
keeping requirements. A broker/dealer or other investor requesting shareholder
servicing or accounting other than the master account or subaccounting service
offered by the fund will be required to enter into a separate agreement with
the agent for these services for a fee to be determined in accordance with the
level of services to be furnished.
Banks and other organizations through which investors may purchase shares of
the fund may impose charges in connection with purchase orders. Investors
should contact their institutions directly to determine what charges, if any,
may be imposed.
Subject to the rules of the SEC, the fund reserves the right to suspend the
continuous offering of the shares at any time, but such suspension shall not
affect the shareholder's right of redemption as described below. The fund also
reserves the right to reject any purchase order and to waive or increase mini-
mum investment requirements.
Telephone Redemption via Fund Direct
To redeem shares held in non-certificate form by telephone with the redemption
proceeds paid via Fund Direct-Electronic Funds Transfer, you must complete the
Telephone Services section of the enclosed Application Form and return it to
Nuveen or our Transfer Agent. If you did not authorize Telephone Redemption via
Fund Direct when you opened your account, you may do so by sending a 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 Di-
rect will be transferred only to the commercial bank account specified by the
shareholder. Redemption proceeds may be delayed one additional business day if
the Federal Reserve Bank of Boston or the Federal Reserve Bank of New York is
closed on the day the redemption proceeds would ordinarily be wired.
If you have authorized Telephone Redemption via Fund Direct, you can take ad-
vantage of two methods of telephone redemption: regular telephone redemption
and expedited telephone redemption. You may make regular Fund Direct redemption
requests by calling Nuveen at (800) 257-8787. 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
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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) 257-8787. If an expedited redemption request is re-
ceived by 12:00 noon Eastern Time, the shares to be redeemed do not earn in-
come on that day, but the redemption is effected, and you will normally re-
ceive 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 Guaran-
tee Program or in such other manner as may be acceptable to the fund. Further
documentation may be required from corporations, executors, trustees or per-
sonal representatives.
The fund reserves the right to refuse a telephone redemption and, at its op-
tion, may limit the timing, amount or frequency of these redemptions. This
procedure may be modified or terminated at any time, on 30 days' notice, by
the fund. The fund, the transfer agent and Nuveen will not be liable for fol-
lowing telephone instructions reasonably believed to be genuine.
Redemption in Kind
The fund has committed to pay in cash all redemption requests made by each
shareholder during any 90 day period up to the lesser of $250,000 or 1% of the
net asset value of the fund at the beginning of such period. This commitment
is irrevocable without the prior approval of the SEC and is a fundamental pol-
icy of the fund which may not be changed without shareholder approval. In the
case of redemption requests in excess of such amounts, the Board of Directors
reserves the right to have the fund make payment in whole or in part in secu-
rities or other assets of the fund in case of an emergency or any time a cash
distribution would impair the liquidity of the Fund to the detriment of the
existing shareholders. In this event, the securities would be valued in the
same manner as the portfolio of the fund is valued. If the recipient were to
sell such securities, he or she would incur brokerage charges.
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.
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<PAGE>
The fund has authorized certain brokers and firms to accept purchase and re-
demption orders on its behalf. The fund will consider an order to be "received"
when such a broker or firm accepts the order from its customer.
SERVICE PLAN
The Fund had adopted a Service Plan Pursuant to Rule 12b-1 under the 1940 Act.
The Plan was adopted by the Board of Directors, including a majority of direc-
tors who are not interested persons and who have no direct or indirect finan-
cial interest in the Plan, and approved by shareholders.
Under the Plan, the Fund pays an annual 12b-1 fee of .25% of the average daily
net assets of serviced accounts to reimburse Nuveen for compensating authorized
dealers, including Nuveen for providing ongoing services to shareholders. Such
services generally include establishing and maintaining shareholder accounts,
processing purchase and redemption orders, arranging for bank wires and answer-
ing shareholder inquiries. Under the Plan, the Fund pays the entire amount of
the 12b-1 fees. Nuveen may, at its discretion and from its own resources, pay
certain firms additional amounts for services rendered to shareholders.
Under the Plan, the Controller of the Fund 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 penal-
ty, 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 securities 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 di-
rect or indirect financial interest in the Plan cast in person at a meeting
called for the purpose of voting on the Plan. The Plan may be continued only if
the directors who vote to approve such continuance conclude, in the exercise of
reasonable business judgment and in light of their fiduciary duties under ap-
plicable law, that there is a reasonable likelihood that the Plan will benefit
such series of the Fund and its shareholders. The Plan is intended to benefit
the fund by promoting the sale of fund shares, which in turn leads to economies
of scale and helps assure the continued viability of the Fund. The Plan may not
be amended to increase materially the cost which the Service Plan series of the
Fund may bear without the approval of the shareholders. Any other material
amendments 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
amendments. During the continuance of the Plan, as required by the Rule, the
selection and nomination of the non-interested directors will be committed to
the discretion of the non-interested directors then in office. Nuveen's compen-
sation under the Plan is not based on Nuveen's expenses incurred in providing
services to shareholders.
No director nor any "interested" person of the Fund has any direct or indirect
financial interest in the Plan or any agreement related to the Plan.
Before June 1999, the Fund had three share classes, each with its own distribu-
tion arrangements. The Institutional series was offered without any 12b-1 or
service fee. The Distribution Plan series was offered with a 12b-1 fee pursuant
to a Distribution Plan and the Service Plan series was offered with a service
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<PAGE>
fee pursuant to a Service Plan. The Distribution Plan was adopted pursuant to
Rule 12b-1 of the 1940 Act while the Service Plan, although containing compa-
rable terms, is not a Rule 12b-1 plan. The Plans were adopted by a vote of the
Board of Directors, including a majority of the directors who are not inter-
ested persons of the Fund and who have no direct or indirect financial inter-
est in the operation of the Plan. Under the Plans, the Distribution Plan se-
ries and the Service Plan series of the Fund and Nuveen paid 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 Distribution Plan series, to securities dealers
for services rendered in the distribution of the shares of such series. In
each case, such services may have included, among other things, establishing
and maintaining shareholder accounts, processing purchase and redemption
transactions, arranging for bank wires, performing sub-accounting, answering
shareholder inquiries and such other services as Nuveen may request. Payments
to such securities dealers and banks or other organizations was at the rate of
.25 of 1% per year of the daily average assets of serviced accounts. Such
amounts was paid one-half by the Service Plan series and the Distribution Plan
series of the Fund and one-half by Nuveen. In addition, Nuveen could, in its
discretion and from its own resources, pay to organizations that satisfy cer-
tain 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, 1999, the Fund paid fees to banks and other organizations
under the Service Plan in the amount of $116,000 and paid fees to securities
dealers under the Distribution Plan in the amount of $23,000.
OTHER INFORMATION REGARDING SHARES OF FUND
Shareholders should note that when a Fund dividend check has been returned to
the sender by the post office after repeated mailings, the shareholder account
will thereafter be registered for automatic reinvestment of dividends and thus
the dividend check and future dividend checks will be reinvested in additional
Fund shares. Shareholders are reminded that they need to advise the 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 Fund, dated January 2, 1990 and last renewed on July 31, 1998 ("Distribu-
tion Agreement"). Pursuant to the Distribution Agreement, the Fund appointed
Nuveen to be its agent for the distribution of the Fund's shares on a continu-
ous offering basis. Nuveen sells shares to or through brokers, dealers, banks
or other qualified financial intermediaries
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<PAGE>
(collectively referred to as "Dealers"), or others, in a manner consistent with
the Fund's then effective registration statement. 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 distrib-
uting of prospectuses and statements of additional information to other than
existing shareholders, the printing and distributing of sales literature, ad-
vertising and payment of compensation and giving of concessions to dealers. Ex-
penses incurred in registering the Fund and its shares under federal and state
securities laws are paid by the Fund.
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<PAGE>
PART C--OTHER INFORMATION
NUVEEN CALIFORNIA TAX-FREE MONEY MARKET FUND, INC.
333 West Wacker Drive
Chicago, Illinois 60606
<PAGE>
PART C--OTHER INFORMATION
Item 23: Exhibits.
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(a)(1) 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) as filed on May 5, 1995, and
incorporated by reference thereto.
(a)(2) Articles of Amendment to the Articles of Incorporation. Filed as Exhibit 1 to
Post-Effective Amendment No. 23 as filed on June 5, 1997, to Registrant's
Registration Statement on Form N-1A (File No. 33-01971) and incorporated by
reference thereto.
(b) 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.
(c) Not applicable.
(d)(1) 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.
(d)(2) 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.
(d)(3) Renewal, dated May 5, 1998, of Investment Management Agreement. Filed as Exhibit
5(c) to Post-Effective Amendment No. 24 to Registrant's Registration Statement
on Form N-1A (File No. 33-01971) as filed on June 16, 1998, and incorporated
herein by reference thereto.
(e)(1) 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.
(e)(2) Renewal, dated July 31, 1997, of Distribution Agreement. Filed as Exhibit 6(b)
to Post-Effective Amendment No. 24 to Registrant's Registration Statement on
Form N-1A (File No. 33-01971) as filed on June 16, 1998, and incorporated herein
by reference thereto.
(f) Not applicable.
(g)(1) Custody Agreement, dated October 1, 1993, between Registrant and United States
Trust Company of New York. Filed as Exhibit 8 to Post-Effective Amendment No. 15
to Registrant's Registration Statement on Form N-1A (File No. 33-01971) and
incorporated herein by reference thereto.
(g)(2) 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 as filed on June 28, 1996, to
Registrant's Registration Statement on Form N-1A (File No. 33-01971) and incor-
porated herein by reference thereto.
</TABLE>
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<TABLE>
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(h)(1) Transfer Agency Agreement between Registrant and Shareholder Services, Inc.,
dated July 1, 1997. Filed as Exhibit 9(a) to Post-Effective Amendment No. 24 to
Registrant's Registration Statement on Form N-1A (File No. 33-01971) as filed on
June 16, 1998, and incorporated herein by reference thereto.
(h)(2) 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.
(h)(3) 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.
(i) Opinion of Morgan, Lewis & Bockius LLP to be filed by later amendment.
(j) Consent of Independent Public Accountants to be filed by later amendment.
(k) Not applicable.
(l) 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.
(m)(1) 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.
(m)(2) 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.
(m)(3) 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 as filed on June 6, 1995, to
Registrant's Registration Statement on Form N-1A (File No. 33-01971) and
incorporated herein by reference thereto.
(m)(4) 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 as filed on
June 28, 1996 to Registrant's Registration Statement on Form N-1A (File No. 33-
01971) and incorporated herein by reference thereto.
(n) Not applicable.
(o) Multiple Class Plan Adopted Pursuant to Rule 18f-3, as amended, filed as Exhibit
18 to Post-Effective Amendment No. 22 as filed on June 28, 1996 to Registrant's
Registration Statement on Form N-1A (File No. 33-01971) and incorporated herein
by reference thereto.
</TABLE>
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<TABLE>
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99(p). 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(q). 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(s)(1) 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. Filed as Exhibit 99(c) to Post-Effective Amendment No. 24 to
Registrant's Registration Statement on Form N-1A (File No. 33-01971) and
incorporated herein by reference thereto.
99(s)(2) Original Power of Attorney for Judith M. Stockdale authorizing, among others,
Gifford R. Zimmerman and Larry W. Martin to execute the Registration Statement on
her behalf as one of the Registrant's Directors were filed as Exhibit 99(d) to
Post-Effective Amendment No. 24 to Registrant's Registration Statement on Form N-
1A (File No. 33-01971) as filed on June 16, 1998, and is incorporated herein by
reference thereto. Original Powers of Attorney for all of Registrant's other
Directors authorizing, among others, Gifford R. Zimmerman and Larry W. Martin to
execute the Registration Statement were filed as Exhibit 99(d) to Post-Effective
Amendment No. 23 as filed on June 5, 1997 to Registrant's Registration Statement
on Form N-1A (File No. 33-01971) and is incorporated herein by reference thereto.
99(r). Code of Ethics and Reporting Requirements. Filed as Exhibit 99(i) to Post-
Effective Amendment No. 19 as filed on May 5, 1995, to Registrant's Registration
Statement on Form N-1A (File No. 33-01971) and incorporated herein by reference
thereto.
99(t). 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 as filed on June 5, 1997 to Registrant's Registration Statement on Form N-
1A (File No. 33-01971) and is incorporated herein by reference thereto.
</TABLE>
Item 24: Persons Controlled by or under Common Control with Registrant
Not Applicable.
Item 25: 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.
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<PAGE>
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 "interested persons" of the
Corporation as defined in the Investment Company Act of 1940 nor parties to
the proceeding, or (b) an independent legal counsel in a written opinion.
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 maxi-
mum deductible of $500,000) against liability and expenses of claims of wrong-
ful 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
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<PAGE>
will, unless in the opinion of its counsel the matter has been settled by con-
trolling precedent, 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 26: Business and Other Connections of Investment Adviser
Nuveen Advisory Corp. serves as investment adviser to the following open-end
management type investment companies: Nuveen Flagship Multistate Trust I,
Nuveen Flagship Multistate Trust II, Nuveen Flagship Multistate Trust III,
Nuveen Flagship Multistate Trust IV, Nuveen Flagship Municipal Trust, Nuveen
Taxable Funds Inc., Nuveen California Tax-Exempt Money Market Fund, Inc.,
Nuveen New York Tax-Exempt Money Market Fund, Nuveen Institutional Tax-Exempt
Money Market Fund, Inc., and Nuveen Municipal Money Market Fund, Inc. It also
serves as investment adviser to the following closed-end management type in-
vestment companies: Nuveen Municipal Value Fund, Inc., Nuveen California Munic-
ipal Value Fund, Inc., Nuveen New York Municipal Value Fund, Inc., Nuveen Mu-
nicipal Income Fund, Inc., Nuveen Premium Income Municipal Fund, Inc., Nuveen
Performance Plus Municipal Fund, Inc., Nuveen California Performance Plus Mu-
nicipal Fund, Inc., Nuveen New York Performance Plus Municipal Fund, Inc.,
Nuveen Municipal Advantage Fund, Inc., Nuveen Municipal Market Opportunity
Fund, Inc., Nuveen California Municipal Market Opportunity Fund, Inc., Nuveen
Investment Quality Municipal Fund, Inc., Nuveen California Investment Quality
Municipal Fund, Inc., Nuveen New York Investment Quality Municipal Fund, Inc.,
Nuveen Insured Quality Municipal Fund, Inc., Nuveen Florida 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 Mu-
nicipal 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 Qual-
ity Income Municipal Fund, Nuveen California Quality Income Municipal Fund,
Inc., Nuveen New York Quality Income Municipal Fund, Inc., Nuveen Premier Mu-
nicipal Income Fund, Inc., Nuveen Premier Insured Municipal Income Fund, Inc.,
Nuveen Premium Income Municipal Fund 2, Inc., Nuveen Insured California Premium
Income Municipal Fund, Inc., Nuveen Insured New York Premium Income Municipal
Fund, Inc., Nuveen Select Maturities Municipal Fund, Nuveen Arizona Premium In-
come Municipal Fund, Inc., Nuveen Insured Florida Premium Income Municipal
Fund, Nuveen Michigan Premium Income Municipal Fund, Inc., Nuveen New Jersey
Premium Income Municipal Fund, Inc., Nuveen Premium Income Municipal Fund 4,
Inc., Nuveen Insured California Premium Income Municipal Fund 2, Inc., Nuveen
Pennsylvania Premium Income Municipal Fund 2, Nuveen Maryland Premium Income
Municipal Fund, Nuveen Massachusetts Premium Income Municipal Fund, Nuveen Vir-
ginia Premium Income Municipal Fund, Nuveen Washington Premium Income Municipal
Fund, Nuveen Connecticut Premium Income Municipal Fund, Nuveen Georgia Premium
Income Municipal Fund, Nuveen Missouri Premium Income Municipal Fund, Nuveen
North Carolina Premium Income Municipal Fund, Nuveen California Premium Income
Municipal Fund and Nuveen Insured Premium Income Municipal Fund 2. Nuveen Advi-
sory Corp. has no other clients or business at the present time. The principal
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 of the investment adviser has engaged
C-5
<PAGE>
during the last two years for his account or in the capacity of director, of-
ficer, employee, partner or trustee, see the descriptions under "Management"
in the Statement of Additional Information.
Timothy R. Schwertfeger is Chairman and Director of Nuveen Advisory Corp., the
investment adviser. Mr. Schwertfeger has, during the last two years, been
Chairman and formerly Executive Vice President and Director of The John Nuveen
Company, John Nuveen & Co. Incorporated, and Nuveen Institutional Advisory
Corp.; Chairman and Director (since January 1997) of Nuveen Asset Management,
Inc.; Director (since 1996) of Institutional Capital Corporation.
Item 27: Principal Underwriters
(a) John Nuveen & Co. Incorporated (Nuveen) acts as principal underwriter to
the following open-end management type investment companies: Nuveen Flagship
Multistate Trust I, Nuveen Flagship Multistate Trust II, Nuveen Flagship
Multistate Trust III, Nuveen Flagship Multistate Trust IV, Nuveen Flagship Mu-
nicipal Trust, Nuveen California Tax-Exempt Money Market Fund, Inc., Nuveen
New York Tax-Exempt Money Market Fund, Nuveen Institutional Tax-Exempt Money
Market Fund, Inc., Nuveen Municipal Money Market Fund, Inc., Nuveen Money Mar-
ket Trust, Nuveen Taxable Funds Inc., Nuveen Investment Trust and Nuveen In-
vestment Trust II and Nuveen Investment Trust III. Nuveen also acts as deposi-
tor and principal underwriter 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 investment companies: Nuveen Municipal Value Fund, Inc.,
Nuveen California Municipal Value Fund, Inc., Nuveen New York Municipal Value
Fund, Inc., Nuveen Municipal Income Fund, Inc., Nuveen Premium Income Munici-
pal Fund, Inc., Nuveen Performance Plus Municipal Fund, Inc., Nuveen Califor-
nia Performance Plus Municipal Fund, Inc., Nuveen New York Performance Plus
Municipal Fund, Inc., Nuveen Municipal Advantage Fund, Inc., Nuveen Municipal
Market Opportunity Fund, Inc., Nuveen California Municipal Market Opportunity
Fund, Inc., Nuveen Investment Quality Municipal Fund, Inc., Nuveen California
Investment Quality Municipal Fund, Inc., Nuveen New York Investment Quality
Municipal Fund, Inc., Nuveen Insured Quality Municipal Fund, Inc., Nuveen
Florida Investment Quality Municipal Fund, Nuveen New Jersey Investment Qual-
ity 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 Select Tax-Free Income Portfolio,
Nuveen Premium Income Municipal Fund 2, Inc., Nuveen Insured California Pre-
mium Income Municipal Fund, Inc., Nuveen Insured New York Premium Income Mu-
nicipal Fund, Inc., Nuveen Select Maturities Municipal Fund, Nuveen Arizona
Premium Income Municipal Fund, Inc., Nuveen Insured Florida Premium Income Mu-
nicipal Fund, Nuveen Michigan Premium Income Municipal Fund, Inc., Nuveen New
Jersey Premium Income Municipal Fund, Inc., Nuveen Premium Income Municipal
Fund 4, Inc., Nuveen Insured California Premium Income Municipal Fund 2, Inc.,
Nuveen Pennsylvania Premium Income Municipal Fund 2, Nuveen Maryland Premium
Income
C-6
<PAGE>
Municipal Fund, Nuveen Massachusetts Premium Income Municipal Fund, Nuveen Vir-
ginia 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 Insured California Select Tax-Free Income
Portfolio, Nuveen Insured New York Select 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
John P. Amboian President None
333 West Wacker Drive
Chicago, IL 60606
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 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
</TABLE>
C-7
<PAGE>
<TABLE>
<CAPTION>
Positions and
Name and Principal Positions and Offices Offices
Business Address with Underwriter with Registrant
- --------------------------------------------------------------------------------
<S> <C> <C>
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
Bradford W. Shaw, Jr. Vice President None
333 West Wacker Drive Chicago, Il-
linois 60606
Paul C. Williams Vice President None
333 West Wacker Drive
Chicago, Illinois 60606
Margaret E. Wilson Vice President None
333 West Wacker Drive and Corporate Controller
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 28: 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
C-8
<PAGE>
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 29: Management Services
Not applicable.
Item 30: Undertakings
(a) Not applicable.
C-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in
the City of Chicago, and State of Illinois, on the 13th day of May, 1999.
NUVEEN CALIFORNIA TAX-FREE MONEY MARKET
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 May 13, 1999
Controller (Principal
Financial and
Accounting Officer)
Timothy R. Schwertfeger Chairman of the Board
and Director (Principal
Executive Officer)
Robert P. Bremner Director
Lawrence H. Brown Director
Anne E. Impellizzeri Director
Peter R. Sawers Director
William J. Schnieder Director
Judith M. Stockdale Director
/s/ Gifford R. Zimmerman
By ________________________
Gifford R. Zimmerman
Attorney-in-Fact
May 13, 1999
</TABLE>
An original power of attorney authorizing, among others, Gifford R. Zimmerman
and Larry W. Martin to execute this Registration Statement, and Amendments
thereto, for Judith M. Stockdale, has been executed and is filed as an Exhibit
to this Registration Statement. An original power of attorney for each of the
other officers and directors of the Registrant has been executed and is incor-
porated by reference in this Registration Statement.
