Logo: NUVEEN Investments
Annual Report August 31, 2001
Municipal Closed-End Exchange-Traded Funds
Dependable, tax-free income to help you keep more of what you earn.
CALIFORNIA
NPC
NCL
NCU
NAC
NVX
Invest well.
Look ahead.
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Photo of: Timothy R. Schwertfeger
Chairman of the Board
Sidebar text: "A diversified portfolio can leave you well positioned to reduce
overall investment risk."
Dear
Shareholder
The events of September 11, 2001, have touched us all, and our hearts and
thoughts go out to those affected directly by the terrible tragedies in New
York, Washington and Pennsylvania.
In the aftermath of these horrible acts, the financial markets have reacted with
volatility and uncertainty as investors attempt to better understand how the
U.S. and world economies are likely to perform in the months ahead. It's too
soon to tell what the long-term impact will be on the markets or your Fund, but
one thing that is increasingly clear to us is that a diversified portfolio that
includes high quality municipal bonds can leave you well positioned to reduce
overall investment risk.
For example, during the period covered by this report, all of these Nuveen Funds
continued to meet their primary objectives of providing attractive monthly
income from a portfolio of high quality municipal bonds. Detailed information on
your Fund's performance can be found in the Portfolio Managers' Comments and
Performance Overview sections of this report. I urge you to take the time to
read them.
In addition to providing you with steady tax-free income, your Nuveen Fund also
features several characteristics that can help make it an essential part of your
overall investment strategy. These include careful research, constant
surveillance and judicious trading by Nuveen's seasoned portfolio management
team, with every action designed to supplement income, improve Fund structure,
better adapt to current market conditions or
1
increase diversification. In turbulent times like these, prudent investors
understand the importance of diversification, balance, and risk management, all
attributes your Nuveen Fund can bring to your portfolio.
For more than 100 years, Nuveen has specialized in offering quality investments
such as these Nuveen Funds to those seeking to accumulate and preserve wealth
and establish a lasting legacy. Our mission continues to be to assist you and
your financial advisor by offering the investment services and products that can
help you invest well and leave your mark for future generations. We thank you
for continuing to choose Nuveen Investments as your partner as you work toward
that goal.
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
October 15, 2001
Sidebar text: "In turbulent times like these, prudent investors understand the
importance of diversification, balance, and risk management."
2
Nuveen California Municipal Closed-End Exchange-Traded Funds
(NPC, NCL, NCU, NAC, NVX)
Portfolio Managers'
Comments
Portfolio managers Steve Krupa and Bill Fitzgerald examine national and state
economic conditions, key investment strategies, and the performance of the
Nuveen California Municipal Closed-End Exchange-Traded Funds. Steve, who has
been with Nuveen since 1979, assumed portfolio management responsibility for NPC
and NCL in March 2001. A 13-year veteran of Nuveen, Bill has managed NCU since
1998 and NAC since 1999. He added the Nuveen California Dividend Advantage
Municipal Fund 2 (NVX) upon its inception in March 2001.
WHAT FACTORS HAD THE GREATEST INFLUENCE ON THE U.S. ECONOMY AND THE MUNICIPAL
MARKET DURING THIS REPORTING PERIOD?
The two major factors affecting the economy and the municipal market over the
twelve months ended August 31, 2001, were the Federal Reserve's shift in
interest rate policy from tightening to easing short-term rates and the general
slowdown in economic growth. In January 2001, the Fed embarked on a series of
rate cuts designed to stimulate the sluggish U.S. economy. During the first
eight months of the year, the Fed announced seven rate reductions totaling 300
basis points, lowering the target federal funds rate to 3.50% as of August 31,
2001. (Following the end of the period covered in this report, in moves intended
to help bolster confidence and stabilize the economy in the aftermath of the
September 11 terrorist attacks, the Fed reduced the target rate by an additional
50 points on both September 17 and October 2, bringing the rate to 2.50%, its
lowest point since 1962.) The consensus among market observers is that the Fed
could continue to ease rates as long as signs of a significant economic slowdown
remain.
In the municipal market, the conditions of the past twelve months, including
tight municipal supply during 2000, helped many bonds perform well. As 2001 got
underway, the Fed's cuts created a more favorable rate environment for both new
municipal issuance and refundings, which together totaled $177.8 billion
nationwide during the first eight months of the year, an increase of 39% over
January-August 2000. On the demand side, municipal bonds continued to be highly
sought after by individual investors looking for diversification, tax-free
income, and an alternative to a volatile stock market. Institutional demand has
also strengthened this year.
In general, improving supply and strong demand helped to keep municipal bond
prices higher than they were twelve months ago. Nevertheless, we believe the
municipal market continues to represent good value. As of August 31, 2001,
long-term municipal yields were 97.2% of 30-year Treasury yields, compared with
100.9% in August 2000.
HOW WAS THE MARKET ENVIRONMENT IN CALIFORNIA?
Over the past twelve months, California faced one of the most serious crises in
its recent history, as energy costs soared and the state's major utilities
encountered financial problems, jeopardizing California's power supply.
Ultimately, the state spent almost $8 billion from its general fund to purchase
electricity at wholesale prices and assure adequate supply. Despite predictions
for heavy outages this summer, the state has experienced no blackouts since May
2001. By August, power supplies had become relatively stable, and energy prices
had declined significantly, due in part to conservation efforts. In addition,
the state had begun measures to access the debt market for needed financial
resources, including the proposed issuance of $13 billion in power bonds
intended to reimburse the general fund for electricity expenditures and bring
solvency back to the troubled investor-owned utilities. Negotiations are
currently underway to secure the required approval from the state legislature to
proceed with this bond issue.
Overall, the California economy slowed over the past twelve months, as the
technology downturn continued to affect most of the state, especially the
Silicon Valley and San Francisco Bay area. As of August 2001, the unemployment
rate in California reached a two-year high of 5.2%, compared with the national
average of 4.9%. As signs of an economic slowdown continue, there could be a
corresponding impact on sales tax, income tax and capital gains tax revenues.
3
Based on revenue concerns, together with the significant costs incurred by the
state during the power crisis, both Moody's and Standard & Poor's downgraded
their ratings on state-issued debt in the spring of 2001 to Aa3 and A+ from Aa2
and AA, respectively. Fitch, the third major rating agency, affirmed the state's
rating at AA, but revised its outlook to negative due to uncertainties
surrounding the resolution of the state's power purchase program, the financial
exposure of the general fund, and the potential long-term effects of the power
crisis. Both Moody's and S&P also carry negative outlooks. Going forward,
California's credit rating could depend largely on the state's ability to bring
the proposed $13 billion power issue to market in a timely manner.
Despite these events, California's municipal market performance was strong for
the twelve months ended August 31, 2001. Among the state's top performing bond
sectors were healthcare and education, while electric utilities staged a strong
comeback in the past six months as legislative initiatives and falling
electricity prices brought greater stability to the trading value of these
bonds. During the first eight months of 2001, California remained the largest
state issuer of municipal debt, with $22 billion of new issuance. This
represented an increase of 45% over January-August 2000 and exceeded the 39%
average increase seen this year in the broad municipal market. As this report
was being prepared, California successfully brought to market an additional $5.7
billion in state notes, the largest one-day debt issuance in municipal market
history, designed to recoup money paid from the general fund for emergency
energy purchases during the power crisis and fund the state's operations over
the next year. This issue sold rapidly to both retail and institutional
investors, demonstrating the continued strong demand for California paper. In
general, Californians, faced with one of the highest marginal income tax rates
in the nation, remained avid buyers of in-state paper over the past twelve
months.
HOW DID THESE NUVEEN CALIFORNIA FUNDS PERFORM OVER THE PAST TWELVE MONTHS?
For the year ended August 31, 2001, the four older Nuveen California Funds
covered in this report - NPC, NCL, NCU, and NAC - produced total annual returns
on net asset value (NAV) as shown in the accompanying table. The annual returns
for the appropriate Lehman Brothers California Tax-Exempt Bond Index1 and Lipper
California Peer Group2 are also presented.
LEHMAN LIPPER
TOTAL RETURN CALIFORNIA CALIFORNIA
MARKET YIELD ON NAV TOTAL RETURN1 AVERAGE2
--------------------------------------------------------------------------------
1 YEAR 1 YEAR 1 YEAR
TAXABLE ENDED ENDED ENDED
8/31/01 EQUIVALENT3 8/31/01 8/31/01 8/31/01
--------------------------------------------------------------------------------
NPC 5.32% 8.44% 12.43% 10.25% 11.59%
--------------------------------------------------------------------------------
NCL 5.34% 8.48% 12.45% 10.25% 11.59%
--------------------------------------------------------------------------------
NCU 5.50% 8.73% 12.92% 9.69% 11.79%
--------------------------------------------------------------------------------
NAC 5.56% 8.83% 15.85% 9.69% 11.79%
--------------------------------------------------------------------------------
NVX 5.68% 9.02% NA
--------------------------------------------------------------------------------
Past performance is not predictive of future results.
For additional information, see the individual Performance Overview for your
Fund in this report.
Over the past twelve months, the combination of thin municipal supply in 2000,
an end to the Fed's tightening agenda, and generally favorable market technicals
created a positive total return environment for municipal bonds. The Funds'
participation in the market's gains is reflected in the total returns on NAV
listed in the previous table.
Between August 31, 2000, and August 31, 2001, the yield on the Bond Buyer 25
Revenue Bond Index fell from 5.72% to 5.22%. In this environment of falling
yields (and rising bond values), funds with longer durations4 would typically
perform well. As of August 31, 2001, the durations of NPC and NCL were 8.99 and
8.54, respectively, compared with 8.58 for the unleveraged Lehman Brothers
California Insured Tax-Exempt Bond Index. NCU's duration was 10.99, compared
with 7.89 for the Lehman California Tax-Exempt Bond Index, while the two Nuveen
California Dividend Advantage Funds - NAC (established in 1999) and NVX
(established in 2001) - had durations of 11.85 and 11.25, respectively, which
are typical of more recently established Funds. While NAC's longer duration was
the main driver behind the Fund's total return for past twelve months, the
relative performance of these Funds was also influenced by differences in
structure as well as individual holdings. Over time, we plan to bring the
durations of both NAC and NVX more closely in line with other Nuveen Funds.
During the past six months, for example, NAC's duration was shortened from
16.86.
HOW DID THE MARKET ENVIRONMENT AFFECT THESE CALIFORNIA FUNDS' DIVIDENDS AND
SHARE PRICES?
All of these Funds use leverage as a way to potentially enhance the dividends
paid to common shareholders. This benefit is tied in part to the short-term
rates the Funds pay their MuniPreferred(R) shareholders. For example, declining
short-term rates can enable the
1 The performances of NPC and NCL are compared with that of the Lehman
Brothers California Insured Tax-Exempt Bond Index, an unleveraged index
comprising a broad range of insured California municipal bonds. The
performances of NCU and NAC are compared with that of the Lehman California
Tax-Exempt Bond Index, an unleveraged index comprising a broad range of
investment-grade California municipal bonds. Results for the Lehman indexes
do not reflect any expenses.
2 The total returns of NPC and NCL are compared with the average annualized
return of the 10 funds in the Lipper California Insured Municipal Debt
Funds category, while NCU's and NAC's total returns are compared with the
average annualized return of the 19 funds in the Lipper California
Municipal Debt Funds category. Fund and Lipper returns assume reinvestment
of dividends.
3 The taxable-equivalent yield represents the yield that must be earned on a
taxable investment in order to equal the yield of the Nuveen Fund on an
after-tax basis. The taxable-equivalent yield is based on the Fund's market
yield on the indicated date and a combined federal and state income tax
rate of 37%.
4 Duration is a measure of a Fund's NAV volatility in reaction to interest
rate movements. Fund duration, also known as leverage-adjusted duration,
takes into account the leveraging process for a Fund and therefore is
generally longer than the duration of the actual portfolio of individual
bonds that make up the Fund. References to duration in this commentary are
intended to indicate Fund duration unless otherwise noted.
4
Funds to adjust the amount of income they pay to preferred shareholders, which
can produce benefits for common shareholders.
During the year ended August 31, 2001, steady or falling short-term interest
rates, combined with good portfolio structure, helped to support the income
streams of all four of the older California Funds. In addition, the lower
short-term rates that resulted from the Fed easing of rates during the first
eight months of 2001 enabled us to increase the dividends of NCL, NCU, and NAC
in June 2001. As of August 31, 2001, these three Funds had each offered
shareholders 15 consecutive months of steady or increasing dividends, while NPC
had provided 15 consecutive months of stable income. NVX, which was introduced
in March 2001, began paying dividends in May and we expect it will continue to
provide very attractive levels of monthly tax-free income to shareholders.
In coming months, the lower rates offered by municipal securities with shorter
maturities could potentially continue to benefit the Funds' dividends by
reducing the amount these Funds pay their MuniPreferred shareholders. This, in
turn, could leave more Fund earnings to support common share dividends. However,
this trend could be offset by the effect of bond calls on the higher-yielding
securities held by these portfolios, especially if refundings increase as
interest rates decline. The level of short-term rates, the number of bond calls,
and the interest rates at which we can reinvest the proceeds of any calls will
all influence the dividends of these Nuveen Funds over the next twelve months.
During the past year, as the stock market remained volatile and the bond market
continued to perform well, many investors turned to tax-free fixed-income
investments as a way to add balance to their portfolios and reduce overall risk.
As a result, the share prices of the four older Nuveen Funds improved (see the
charts on the individual Performance Overview pages). On the whole, however, the
NAVs of these Funds appreciated more rapidly than their share prices, and all
four Funds continued to trade at slight discounts (share price below NAV). As of
August 31, 2001, strong demand had benefited NVX's share price, which was
trading at levels above its IPO (initial public offering) price earlier this
year.
WHAT KEY STRATEGIES WERE USED TO MANAGE THE NUVEEN CALIFORNIA FUNDS DURING THE
YEAR ENDED AUGUST 31, 2001?
As evidenced by their twelve-month total returns on NAV, the four older Nuveen
California Funds were generally well structured going into this period. Despite
the tight supply of new municipal issuance during 2000, the Funds continued to
meet their goal of keeping assets fully invested and working for shareholders.
As issuance became more plentiful in 2001, this provided opportunities to
enhance portfolio structure and strategically position the Funds for the next
leg of the bond market cycle. We also took advantage of market conditions over
the past year to improve the call protection of these Funds.
As insured funds, NPC and NCL are 100% invested in insured and/or U.S.
guaranteed bonds, which means that credit quality is not an issue. The events of
the past twelve months, including the California power crisis, offered an
excellent example of the ways fully insured Funds such as these provide value
and play an important role in the portfolios of investors who are risk-averse.
The non-insured Funds - NCU, NAC, and NVX - also offered excellent credit
quality, with allocations of bonds rated AAA/U.S. guaranteed and AA ranging from
56% in NAC to 87% in NVX as of August 31, 2001. Each of these three Funds also
had a portion of its assets invested in BBB and non-rated bonds, which benefited
from narrowing credit spreads over the past few months. In 1999 and 2000, credit
spreads, or the difference in yield between higher-rated and lower-rated bonds,
widened overall. As this trend began to reverse itself in the first quarter of
2001, lower-rated bonds generally appreciated in price. This change is reflected
in the performance of healthcare bonds during the first eight months of 2001,
when they were the top sector in both the national and California municipal
markets.
Among the Fund holdings benefiting from this trend were bonds issued by Central
California Joint Powers Health Financing Authority for Community Hospitals of
Central California, a healthcare provider in the Fresno metropolitan area. These
bonds, which were held by NAC, were rated Baa1/BBB+ and offered a 15.21% total
return over the past twelve months. Another healthcare holding that performed
well over the past year was Cedars-Sinai Medical Center, which was held in NAC.
5
Overall, our focus in all of the Funds was finding attractive bonds with the
potential to support the Funds' long-term dividend-payment capabilities and add
value and diversification. For example, NPC and NCL recently added a total of
$11 million in certificates of participation issued for infrastructure
development by the community of El Monte. These AMBAC-insured bonds, which were
offered as a limited placement to institutional investors only, provided a yield
of approximately 98% of 30-year Treasury yields at very attractive prices.
Earlier in 2001, we introduced the Nuveen California Dividend Advantage
Municipal Fund 2 (NVX). As of August 31, 2001, NVX was fully invested and, in
our opinion, performing well for shareholders. As mentioned earlier, the Fund
met its dividend target, making its first monthly income payment in June 2001.
In assembling NVX's broad-based portfolio, we focused on purchasing
high-quality, long-term securities, as reflected in the Fund's 87% allocation of
bonds rated AAA and AA. A Sacramento Municipal Utility District issue, one of
NVX's largest holdings, is typical of the types of bonds we purchased for this
Fund. These bonds also provide 11 years of call protection, which should help to
protect NVX`s income stream over this period. As of August 31, 2001, the Fund's
three largest sector weightings were limited and general tax obligation issues
and education bonds.
WHAT IS YOUR OUTLOOK FOR THE MUNICIPAL MARKET IN GENERAL AND THESE NUVEEN
CALIFORNIA FUNDS IN PARTICULAR?
While it is still too soon to determine the long-range effects of the tragic
events of September 11, 2001, on the markets and on your Funds, our general
outlook for the fixed-income markets over the next twelve months remains
positive. Because many new-issue offerings were postponed as a result of these
events, a significant number of issues had to be priced in a short time as the
markets stabilized, leading to higher yields in the municipal market relative to
the taxable bond market. We expect to see substantial issuance continue during
the fourth quarter of 2001, especially in the California market. If interest
rates continue to fall and the pace of refundings accelerates, new municipal
issuance nationwide in 2001 could exceed $250 billion. At the same time, demand
for tax-exempt municipal bonds is anticipated to stay strong, as investors look
for ways to rebalance their portfolios and reduce potential risk. In general, we
believe the Nuveen Funds are well positioned, and we will continue to closely
monitor and respond to events as appropriate.
Looking specifically at these Nuveen California Funds, our strategic approach to
bond calls over the past year generally improved the call protection levels of
the older Nuveen Funds, with scheduled calls ranging from 2% in NAC to 19% in
NCL and NCU between September 2001 and December 2003. Between now and the end of
2003, the newly established NVX has 5% of its portfolio subject to calls. NPC,
however, will mark the ten-year anniversary of its inception in November 2002,
reaching the point of the bond market cycle typically associated with an
increase in call exposure. In 2002 and 2003, this Fund could see bond calls
affecting as much as 30% of its portfolio, depending on market interest rates
during this time. Given the current level of rates, our strategy will be to hold
higher-yielding bonds as long as possible to help support NPC's dividend, while
we look for attractive replacement opportunities that can extend the Fund's call
protection. We believe all of these call positions are very manageable,
especially given the timeframe, and we foresee no problems in working through
them. While we cannot control the direction of interest rates, we continue to
work to reduce the Funds' call exposure and to actively manage all of the Funds
to mitigate the longer-term effects of the bond call process.
In our opinion, the Nuveen California Funds are well positioned for the market
environment of the next twelve months. As value-oriented investors, we plan to
remain focused on ways we can add value for our shareholders, provide support
for the Funds' dividends, and watch new issuance for opportunities to purchase
the research-intensive credits that fully utilize Nuveen's expertise in this
area and help us adapt our strategies to changing market conditions. One of our
priorities will be managing portfolio structure to strategically position the
Funds for a potential economic recovery. This includes managing the Funds'
durations conservatively and, in the non-insured Funds, taking advantage of
narrowing credit spreads to further improve credit quality. Overall, we believe
the Nuveen California Funds will continue to play an important role in
investors' long-range financial programs, providing balance and diversification,
dependable tax-free income, quality investments, and a measure of stability in
uncertain times such as these.
6
Nuveen Insured California Premium Income Municipal Fund, Inc.
Performance
Overview As of August 31, 2001
NPC
Pie Chart:
CREDIT QUALITY
Insured 82%
U.S. Guaranteed 18%
PORTFOLIO STATISTICS
--------------------------------------------------
Share Price $15.69
--------------------------------------------------
Net Asset Value $16.04
--------------------------------------------------
Market Yield 5.32%
--------------------------------------------------
Taxable-Equivalent Yield
(Federal Income Tax Rate)1 7.65%
--------------------------------------------------
Taxable-Equivalent Yield
(Federal and State Income Tax Rate)1 8.44%
--------------------------------------------------
Fund Net Assets ($000) $148,068
--------------------------------------------------
Average Effective Maturity (Years) 20.43
--------------------------------------------------
Leverage-Adjusted Duration 8.99
--------------------------------------------------
ANNUALIZED TOTAL RETURN (Inception 11/92)
--------------------------------------------------
ON SHARE PRICE ON NAV
--------------------------------------------------
1-Year 14.12% 12.43%
--------------------------------------------------
5-Year 8.44% 7.85%
--------------------------------------------------
Since Inception 6.38% 7.23%
--------------------------------------------------
TOP FIVE SECTORS (as a % of total investments)
--------------------------------------------------
Tax Obligation/Limited 21%
--------------------------------------------------
U.S.Guaranteed 18%
--------------------------------------------------
Tax Obligation/General 14%
--------------------------------------------------
Water and Sewer 14%
--------------------------------------------------
Healthcare 10%
--------------------------------------------------
Bar Chart:
2000-2001 MONTHLY TAX-FREE DIVIDENDS PER SHARE2
9/00 0.0695
10/00 0.0695
11/00 0.0695
12/00 0.0695
1/01 0.0695
2/01 0.0695
3/01 0.0695
4/01 0.0695
5/01 0.0695
6/01 0.0695
7/10 0.0695
8/01 0.0695
Line Chart:
SHARE PRICE PERFORMANCE
Weekly Closing Price
9/01/00 14.63
14.94
14.75
14.69
14.56
14.56
14.38
14.06
14.19
14.56
14.25
14.44
14.44
14.31
14.44
14.5
14.75
14.75
15.19
15.38
15.25
15.3
15.02
15.2
15.2
15.25
15.19
15
14.78
14.78
14.92
14.85
14.65
14.64
15.1
14.85
14.81
14.9
15
15.2
14.95
14.8
14.9
14.98
15.01
15.08
15.05
15.25
15.45
15.65
15.7
8/31/01 15.69
Past performance is not predictive of future results.
1 Taxable-equivalent yield represents the yield on a taxable investment
necessary to equal the yield of the Nuveen Fund on an after-tax basis. It
is calculated using the current market yield and a federal income tax rate
of 30.5%. The rate shown for federal and state highlights the added value
of owning shares that are also exempt from state income taxes. It is based
on a combined federal and state income tax rate of 37%.
2 The Fund also paid shareholders a net ordinary income distribution in
December 2000 of $0.0222 per share.
7
Nuveen Insured California Premium Income Municipal Fund 2, Inc.
Performance
Overview As of August 31, 2001
NCL
Pie Chart:
CREDIT QUALITY
Insured 93%
Insured and U.S. Guaranteed 4%
U.S. Guaranteed 3%
PORTFOLIO STATISTICS
--------------------------------------------------
Share Price $14.83
--------------------------------------------------
Net Asset Value $15.01
--------------------------------------------------
Market Yield 5.34%
--------------------------------------------------
Taxable-Equivalent Yield
(Federal Income Tax Rate)1 7.68%
--------------------------------------------------
Taxable-Equivalent Yield
(Federal and State Income Tax Rate)1 8.48%
--------------------------------------------------
Fund Net Assets ($000) $284,633
--------------------------------------------------
Average Effective Maturity (Years) 18.53
--------------------------------------------------
Leverage-Adjusted Duration 8.54
--------------------------------------------------
ANNUALIZED TOTAL RETURN (Inception 3/93)
--------------------------------------------------
ON SHARE PRICE ON NAV
--------------------------------------------------
1-Year 11.99% 12.45%
--------------------------------------------------
5-Year 9.44% 8.24%
--------------------------------------------------
Since Inception 5.72% 6.48%
--------------------------------------------------
TOP FIVE SECTORS (as a % of total investments)
--------------------------------------------------
Tax Obligation/Limited 41%
--------------------------------------------------
Tax Obligation/General 12%
--------------------------------------------------
Water and Sewer 8%
--------------------------------------------------
U.S.Guaranteed 7%
--------------------------------------------------
Education and Civic Organizations 7%
--------------------------------------------------
Bar Chart:
2000-2001 MONTHLY TAX-FREE DIVIDENDS PER SHARE2
9/00 0.0645
10/00 0.0645
11/00 0.0645
12/00 0.0645
1/01 0.0645
2/01 0.0645
3/01 0.0645
4/01 0.0645
5/01 0.0645
6/01 0.066
7/10 0.066
8/01 0.066
Line Chart:
SHARE PRICE PERFORMANCE
Weekly Closing Price
9/01/00 13.94
14
13.88
13.75
13.75
13.38
13.31
13.38
13.25
13.25
13.31
13.13
13.25
13.19
13.38
13.69
13.81
14
14.69
14.88
14.56
14.67
14.51
14.45
14.35
14.39
14.2
13.88
13.63
14.02
13.91
13.61
13.72
13.66
13.79
13.91
13.96
13.8
13.9
13.96
13.82
13.96
14
14.05
14.1
14.26
14.47
14.53
14.85
14.88
14.91
8/31/01 14.83
Past performance is not predictive of future results.
1 Taxable-equivalent yield represents the yield on a taxable investment
necessary to equal the yield of the Nuveen Fund on an after-tax basis. It
is calculated using the current market yield and a federal income tax rate
of 30.5%. The rate shown for federal and state highlights the added value
of owning shares that are also exempt from state income taxes. It is based
on a combined federal and state income tax rate of 37%.
2 The Fund also paid shareholders a net ordinary income distribution in
December 2000 of $0.0012 per share.
8
Nuveen California Premium Income Municipal Fund
Performance
Overview As of August 31, 2001
NCU
Pie Chart:
CREDIT QUALITY
AAA/U.S. Guaranteed 60%
AA 10%
A 6%
BBB 7%
NR 14%
Other 3%
PORTFOLIO STATISTICS
--------------------------------------------------
Share Price $14.17
--------------------------------------------------
Net Asset Value $14.22
--------------------------------------------------
Market Yield 5.50%
--------------------------------------------------
Taxable-Equivalent Yield
(Federal Income Tax Rate)1 7.91%
--------------------------------------------------
Taxable-Equivalent Yield
(Federal and State Income Tax Rate)1 8.73%
--------------------------------------------------
Fund Net Assets ($000) $125,067
--------------------------------------------------
Average Effective Maturity (Years) 17.56
--------------------------------------------------
Leverage-Adjusted Duration 10.99
--------------------------------------------------
ANNUALIZED TOTAL RETURN (Inception 6/93)
--------------------------------------------------
ON SHARE PRICE ON NAV
--------------------------------------------------
1-Year 12.84% 12.92%
--------------------------------------------------
5-Year 9.70% 8.24%
--------------------------------------------------
Since Inception 5.34% 6.05%
--------------------------------------------------
TOP FIVE SECTORS (as a % of total investments)
--------------------------------------------------
Tax Obligation/Limited 32%
--------------------------------------------------
Tax Obligation/General 14%
--------------------------------------------------
Healthcare 13%
--------------------------------------------------
Housing/Multifamily 12%
--------------------------------------------------
U.S.Guaranteed 10%
--------------------------------------------------
Bar Chart:
2000-2001 MONTHLY TAX-FREE DIVIDENDS PER SHARE2
9/00 0.064
10/00 0.064
11/00 0.064
12/00 0.064
1/01 0.064
2/01 0.064
3/01 0.064
4/01 0.064
5/01 0.064
6/01 0.065
7/10 0.065
8/01 0.065
Line Chart:
SHARE PRICE PERFORMANCE
Weekly Closing Price
9/01/00 13.31
13.38
13.31
13.13
13.19
13
12.88
12.5
12.5
12.81
12.94
12.81
12.94
13.06
13
13.06
13.19
13.69
13.88
13.94
14.06
14.08
13.97
14
14
14.02
14
13.56
13
13.3
13.49
13.18
13.05
13.09
13.01
13.18
13.35
13.28
13.25
13.48
13.41
13.36
13.53
13.45
13.46
13.5
13.54
13.9
14.03
14.21
14.2
8/31/01 14.17
Past performance is not predictive of future results.
1 Taxable-equivalent yield represents the yield on a taxable investment
necessary to equal the yield of the Nuveen Fund on an after-tax basis. It
is calculated using the current market yield and a federal income tax rate
of 30.5%. The rate shown for federal and state highlights the added value
of owning shares that are also exempt from state income taxes. It is based
on a combined federal and state income tax rate of 37%.
2 The Fund also paid shareholders a net ordinary income distribution in
December 2000 of $0.0151 per share.
9
Nuveen California Dividend Advantage Municipal Fund
Performance
Overview As of August 31, 2001
NAC
Pie Chart:
CREDIT QUALITY
AAA/U.S. Guaranteed 46%
AA 10%
A 20%
BBB 14%
NR 10%
PORTFOLIO STATISTICS
--------------------------------------------------
Share Price $14.89
--------------------------------------------------
Net Asset Value $15.13
--------------------------------------------------
Market Yield 5.56%
--------------------------------------------------
Taxable-Equivalent Yield
(Federal Income Tax Rate)1 8.00%
--------------------------------------------------
Taxable-Equivalent Yield
(Federal and State Income Tax Rate)1 8.83%
--------------------------------------------------
Fund Net Assets ($000) $529,197
--------------------------------------------------
Average Effective Maturity (Years) 25.27
--------------------------------------------------
Leverage-Adjusted Duration 11.85
--------------------------------------------------
ANNUALIZED TOTAL RETURN (Inception 5/99)
--------------------------------------------------
ON SHARE PRICE ON NAV
--------------------------------------------------
1-Year 15.06% 15.85%
--------------------------------------------------
Since Inception 5.80% 8.64%
--------------------------------------------------
TOP FIVE SECTORS (as a % of total investments)
--------------------------------------------------
Tax Obligation/Limited 19%
--------------------------------------------------
Transportation 16%
--------------------------------------------------
Water and Sewer 16%
--------------------------------------------------
Healthcare 13%
--------------------------------------------------
Utilities 9%
--------------------------------------------------
Bar Chart:
2000-2001 MONTHLY TAX-FREE DIVIDENDS PER SHARE
9/00 0.067
10/00 0.067
11/00 0.067
12/00 0.067
1/01 0.067
2/01 0.067
3/01 0.067
4/01 0.067
5/01 0.067
6/01 0.069
7/10 0.069
8/01 0.069
Line Chart:
SHARE PRICE PERFORMANCE
Weekly Closing Price
9/01/00 13.69
13.75
13.31
13.25
13
13
12.88
12.94
13.13
13.06
12.88
13.19
12.94
12.81
13.06
13.69
13.69
14.13
14.5
14.63
14.69
14.38
14.45
14.24
14.2
14.48
14.15
14.06
13.41
14.3
13.7
13.44
13.49
13.44
13.7
14
14
13.92
13.9
14
14
13.98
13.94
14.13
14.19
14.25
14.42
14.7
14.81
14.9
14.81
8/31/01 14.89
Past performance is not predictive of future results.
1 Taxable-equivalent yield represents the yield on a taxable investment
necessary to equal the yield of the Nuveen Fund on an after-tax basis. It
is calculated using the current market yield and a federal income tax rate
of 30.5%. The rate shown for federal and state highlights the added value
of owning shares that are also exempt from state income taxes. It is based
on a combined federal and state income tax rate of 37%.
10
Nuveen California Dividend Advantage Municipal Fund 2
Performance
Overview As of August 31, 2001
NVX
Pie Chart:
CREDIT QUALITY
AAA/U.S. Guaranteed 75%
AA 12%
A 3%
BBB 2%
NR 6%
Other 2%
PORTFOLIO STATISTICS
--------------------------------------------------
Share Price $15.21
--------------------------------------------------
Net Asset Value $15.11
--------------------------------------------------
Market Yield 5.68%
--------------------------------------------------
Taxable-Equivalent Yield
(Federal Income Tax Rate)1 8.17%
--------------------------------------------------
Taxable-Equivalent Yield
(Federal and State Income Tax Rate)1 9.02%
--------------------------------------------------
Fund Net Assets ($000) $333,440
--------------------------------------------------
Average Effective Maturity (Years) 26.09
--------------------------------------------------
Leverage-Adjusted Duration 11.25
--------------------------------------------------
TOTAL RETURN (Inception 3/01)
--------------------------------------------------
ON SHARE PRICE ON NAV
--------------------------------------------------
Since Inception 3.40% 7.55%
--------------------------------------------------
TOP FIVE SECTORS (as a % of total investments)
--------------------------------------------------
Tax Obligation/Limited 31%
--------------------------------------------------
Tax Obligation/General 16%
--------------------------------------------------
Education and Civic Organizations 13%
--------------------------------------------------
Water and Sewer 11%
--------------------------------------------------
Utilities 11%
--------------------------------------------------
Bar Chart:
2001 Monthly Tax-Free Dividends Per Share
5/01 0.072
6/01 0.072
7/10 0.072
8/01 0.072
Line Chart:
Share Price Performance
Weekly Closing Price
3/30/01 15
15.12
15.01
15.07
15.01
15.14
15.07
14.99
14.72
14.7
14.5
14.56
14.39
14.42
14.79
15
15.02
14.8
15.07
15.1
15.24
15.34
8/31/01 15.21
Past performance is not predictive of future results.
1 Taxable-equivalent yield represents the yield on a taxable investment
necessary to equal the yield of the Nuveen Fund on an after-tax basis. It
is calculated using the current market yield and a federal income tax rate
of 30.5%. The rate shown for federal and state highlights the added value
of owning shares that are also exempt from state income taxes. It is based
on a combined federal and state income tax rate of 37%.
11
Report of
Independent Auditors
THE BOARDS OF DIRECTORS, TRUSTEES AND SHAREHOLDERS
NUVEEN INSURED CALIFORNIA PREMIUM INCOME MUNICIPAL FUND, INC.
NUVEEN INSURED CALIFORNIA PREMIUM INCOME MUNICIPAL FUND 2, INC.
NUVEEN CALIFORNIA PREMIUM INCOME MUNICIPAL FUND
NUVEEN CALIFORNIA DIVIDEND ADVANTAGE MUNICIPAL FUND
NUVEEN CALIFORNIA DIVIDEND ADVANTAGE MUNICIPAL FUND 2
We have audited the accompanying statements of net assets, including the
portfolios of investments, of Nuveen Insured California Premium Income Municipal
Fund, Inc., Nuveen Insured California Premium Income Municipal Fund 2, Inc.,
Nuveen California Premium Income Municipal Fund, Nuveen California Dividend
Advantage Municipal Fund and Nuveen California Dividend Advantage Municipal Fund
2 as of August 31, 2001, and the related statements of operations, changes in
net assets and the financial highlights for the periods indicated therein. These
financial statements and financial highlights are the responsibility of the
Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of investments
owned as of August 31, 2001, by correspondence with the custodian. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial positions of
Nuveen Insured California Premium Income Municipal Fund, Inc., Nuveen Insured
California Premium Income Municipal Fund 2, Inc., Nuveen California Premium
Income Municipal Fund, Nuveen California Dividend Advantage Municipal Fund and
Nuveen California Dividend Advantage Municipal Fund 2 at August 31, 2001, and
the results of their operations, changes in their net assets and financial
highlights for the periods indicated therein in conformity with accounting
principles generally accepted in the United States.
/s/ Ernst & Young LLP
Chicago, Illinois
October 12, 2001
12
Nuveen Insured California Premium Income Municipal Fund, Inc. (NPC)
Portfolio of
Investments August 31, 2001
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
EDUCATION AND CIVIC ORGANIZATIONS - 5.6%
$ 2,000 California Educational Facilities Authority, Revenue Bonds (Santa 9/06 at 102 AAA $2,143,320
Clara University), Series 1996, 5.750%, 9/01/26
6,620 California Educational Facilities Authority, Refunding Revenue No Opt. Call Aaa 1,115,404
Bonds (Loyola Marymount University), Series 2001A,
0.000%, 10/01/35
5,000 California Educational Facilities Authority, Student Loan Revenue 3/08 at 102 Aaa 5,096,900
Bonds (California Loan Program), Series 2001A,
5.400%, 3/01/21 (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
HEALTHCARE - 9.5%
3,000 California Health Facilities Financing Authority, Insured Revenue 8/08 at 101 AAA 3,132,450
Bonds (Sutter Health), Series 1998A, 5.375%, 8/15/30
California Statewide Communities Development Authority, Sutter
Health Obligated Group, Certificates of Participation:
1,500 5.500%, 8/15/19 8/09 at 101 AAA 1,617,705
4,000 6.125%, 8/15/22 8/02 at 102 AAA 4,190,400
4,800 The Regents of the University of California, Hospital Revenue 7/06 at 101 AAA 5,093,184
Bonds (UC Davis Medical Center), Series 1996, 5.750%, 7/01/24
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY - 6.0%
1,000 ABAG Finance Authority for Nonprofit Corporations, California, 9/09 at 100 AAA 1,046,580
Multifamily Housing Revenue Bonds (Civic Center Drive
Apartments Project), 1999 Series A, 5.800%, 9/01/20
(Alternative Minimum Tax)
3,650 California Housing Finance Agency, Multi-Unit Rental Housing 2/03 at 102 Aa2 3,776,400
Revenue Bonds, Series 1992A-II, 6.625%, 2/01/24 (Alternative
Minimum Tax)
3,965 The City of Los Angeles (California), Tax-Exempt Mortgage Revenue 7/02 at 102 AAA 4,050,129
Refunding Bonds, Series 1993A (FHA-Insured Mortgage
Loans - Section 8 Assisted Projects), 6.300%, 1/01/25
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 3.3%
1,655 California Housing Finance Agency, Single Family Mortgage Bonds II, 2/07 at 102 AAA 1,752,231
1997 Series A-1, 6.000%, 8/01/20 (Alternative Minimum Tax)
3,000 California Housing Finance Agency, Home Mortgage Revenue 8/08 at 101 AAA 3,064,230
Bonds, Series 1998Q, 5.050%, 8/01/17
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 14.3%
State of California, Various Purpose General Obligation Bonds:
7,995 5.750%, 3/01/22 3/10 at 101 AAA 8,781,948
2,000 5.750%, 3/01/27 3/10 at 101 AAA 2,189,260
1,225 Fresno Unified School District (Fresno County, California), 2/13 at 103 AAA 1,489,784
General Obligation Refunding Bonds, Series 1998A, 6.550%, 8/01/20
2,500 Fresno Unified School District (Fresno County, California), 8/09 at 102 AAA 2,564,400
General Obligation Bonds, Election of 2001, Series 2001A,
5.125%, 8/01/26
2,000 City of Los Angeles, California, Unified School District, General 7/08 at 102 AAA 2,042,120
Obligation Bonds, 1997 Series A, 5.000%, 7/01/21
500 Los Angeles Unified School District, California, General Obligation 7/10 at 100 AAA 524,875
Bonds, Election of 1997, 2000 Series D, 5.375%, 7/01/25
3,000 Pomona Unified School District, California, General Obligation 8/11 at 103 AAA 3,572,310
Refunding Bonds, Series 1997-A, 6.500%, 8/01/19
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 20.7%
2,000 State Public Works Board of the State of California, Lease Revenue 11/09 at 101 AAA 2,185,200
Bonds (California Department of Health Services),
1999 Series A (Richmond Laboratory Project), 5.750%, 11/01/24
5,000 City of El Monte, California, Department of Public Services 1/11 at 100 AAA 5,173,050
Facility Phase II, Certificates of Participation, Senior Lien
Series 2001, 5.250%, 1/01/34
4,000 Los Angeles County Metropolitan Transportation Authority, 7/03 at 100 AAA 4,018,840
California, Sales Tax Revenue Refunding Bonds, Proposition A,
Series 1993-A, 5.000%, 7/01/21
13
Nuveen Insured California Premium Income Municipal Fund, Inc. (NPC) (continued)
Portfolio of Investments August 31, 2001
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED (continued)
$ 4,000 Norco Redevelopment Agency, California, Refunding Tax Allocation 3/02 at 102 AAA $4,150,520
Bonds (Norco Redevelopment Project Area No. One),
Series 1992, 6.250%, 3/01/19
2,135 City of San Buenaventura, California, Refunding Certificates of 1/03 at 100 AAA 2,168,690
Participation (Capital Improvements Project), Series 1993,
5.500%, 1/01/17
9,500 Redevelopment Agency of the City of San Jose, California, Tax 2/04 at 102 AAA 9,375,550
Allocation Bonds (Merged Area Redevelopment Project),
Series 1993, 4.750%, 8/01/24
3,600 Santa Clara County Financing Authority, California, Lease Revenue 11/07 at 102 AAA 3,656,664
Bonds (VMC Facility Replacement Project), 1994 Series A,
5.000%, 11/15/22
------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED - 18.2%
6,000 Huntington Park Redevelopment Agency, California, Single No Opt. Call AAA 8,430,600
Family Residential Mortgage Revenue Refunding Bonds,
1986 Series A, 8.000%, 12/01/19
5,135 Community Redevelopment Agency of the City of Palmdale, No Opt. Call AAA 6,957,771
California, Single Family Mortgage Revenue Bonds,
Series 1986A Restructured, 8.000%, 3/01/16 (Alternative
Minimum Tax)
6,220 County of Riverside, California, Single Family Mortgage Revenue No Opt. Call AAA 9,378,578
Bonds (GNMA Mortgage-Backed Securities Program), Issue A of
1987, 9.000%, 5/01/21 (Alternative Minimum Tax)
1,485 City of San Jose, California, Single Family Mortgage Revenue No Opt. Call AAA 2,227,500
Bonds, 1985 Series A, 9.500%, 10/01/13
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 7.0%
4,000 California Pollution Control Financing Authority, Pollution Control 12/02 at 102 AAA 4,141,600
Revenue Bonds (Southern California Edison Company),
1992 Series B, 6.400%, 12/01/24 (Alternative Minimum Tax)
4,000 City of Chula Vista, California, Industrial Development Revenue 12/02 at 102 AA- 4,128,560
Bonds (San Diego Gas and Electric Company), 1992 Series A,
6.400%, 12/01/27 (Alternative Minimum Tax)
2,000 Sacramento Municipal Utility District (California), Electric Revenue 8/02 at 100 AAA 2,058,240
Refunding Bonds, 1992 Series A, 5.750%, 8/15/13
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 14.1%
7,000 The City of Los Angeles, California, Wastewater System Revenue 11/03 at 102 AAA 7,005,110
Bonds, Series 1993D, 4.700%, 11/01/19
3,400 Public Facilities Financing Authority of the City of San Diego 5/07 at 101 AAA 3,534,912
(California), Sewer Revenue Bonds, Series 1997A,
5.250%, 5/15/22
1,390 City of Santa Monica, California, Wastewater Enterprise Revenue 1/04 at 102 AAA 1,398,896
Bonds (Hyperion Project), 1993 Refunding Series, 4.500%, 1/01/15
5,000 Wheeler Ridge-Maricopa Water Storage District (Kern County, 11/06 at 102 AAA 5,457,950
California), 1996 Water Refunding Bonds, 5.700%, 11/01/15
3,425 City of Woodland (Yolo County, California), Certificates of 3/03 at 100 AAA 3,482,847
Participation (1992 Wastewater System Refunding Project),
5.500%, 3/01/18
------------------------------------------------------------------------------------------------------------------------------------
$ 138,700 Total Investments (cost $129,845,249) - 98.7% 146,174,708
=============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.3% 1,893,117
--------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $148,067,825
====================================================================================================================
All of the bonds in the portfolio are either covered by
Original Issue Insurance, Secondary Market Insurance or
Portfolio Insurance, or are backed by an escrow or trust
containing sufficient U.S. Government or U.S. Government
agency securities, any of which ensure the timely payment of
principal and interest.
* Optional Call Provisions (not covered by the report of
independent auditors): Dates (month and year) and prices of
the earliest optional call or redemption. There may be other
call provisions at varying prices at later dates.
** Ratings (not covered by the report of independent auditors):
Using the higher of Standard & Poor's or Moody's rating.
See accompanying notes to financial statements.
14
Nuveen Insured California Premium Income Municipal Fund 2, Inc. (NCL)
Portfolio of
Investments August 31, 2001
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
EDUCATION AND CIVIC ORGANIZATIONS - 7.0%
California Educational Facilities Authority, Revenue Bonds (Santa
Clara University), Series 1996:
$ 2,400 5.750%, 9/01/21 9/06 at 102 AAA $2,581,728
3,000 5.750%, 9/01/26 9/06 at 102 AAA 3,214,980
2,000 California Educational Facilities Authority, Revenue Bonds 11/10 at 100 Aaa 2,230,820
(University of the Pacific), Series 2000, 5.875%, 11/01/20
California Educational Facilities Authority, Revenue Bonds (Loyola
Marymount University), Series 2001A Refunding:
6,615 0.000%, 10/01/33 No Opt. Call Aaa 1,240,776
6,615 0.000%, 10/01/34 No Opt. Call Aaa 1,176,213
5,000 California Educational Facilities Authority, Student Loan Revenue 3/08 at 102 Aaa 5,096,900
Bonds (California Loan Program), Series 2001A, 5.400%, 3/01/21
(Alternative Minimum Tax)
California Infrastructure and Economic Development Bank, Revenue
Bonds (Asian Art Museum of San Francisco Project), Series 2000:
1,295 5.500%, 6/01/19 6/10 at 101 AAA 1,407,756
1,000 5.500%, 6/01/20 6/10 at 101 AAA 1,079,500
1,900 The Regents of the University of California, University of 11/03 at 102 AAA 1,979,819
California Housing System Revenue Bonds, Series A, 5.500%, 11/01/18
------------------------------------------------------------------------------------------------------------------------------------
HEALTHCARE - 3.4%
1,450 California Health Facilities Financing Authority, Insured Health 7/06 at 102 AAA 1,610,660
Facility Refunding Revenue Bonds (Mark Twain St. Joseph's
Healthcare), 1996 Series A, 6.000%, 7/01/19
5,000 California Health Facilities Financing Authority, Insured Health 7/06 at 102 AAA 5,422,150
Facility Refunding Revenue Bonds (Catholic Healthcare West),
1996 Series A, 6.000%, 7/01/25
2,500 City of Oakland, California, Insured Revenue Bonds (1800 Harrison 1/10 at 100 AAA 2,773,600
Foundation - Kaiser Permanente), Series 1999A, 6.000%, 1/01/29
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY - 6.3%
ABAG Finance Authority for Nonprofit Corporations, California,
Multifamily Housing Revenue Bonds (Civic Center Drive Apartments
Project), 1999 Series A:
4,000 5.800%, 9/01/20 (Alternative Minimum Tax) 9/09 at 100 AAA 4,186,320
1,370 5.875%, 3/01/32 (Alternative Minimum Tax) 9/09 at 100 AAA 1,424,444
4,085 The Community Redevelopment Agency of the City of Los Angeles, 6/05 at 105 AAA 4,597,708
California, Multifamily Housing Revenue Refunding Bonds,
1995 Series A (Angelus Plaza Project), 7.400%, 6/15/10
7,400 Housing Authority of the County of Santa Cruz, California, 5/03 at 102 Aaa 7,655,892
Tax-Exempt Multifamily Housing Revenue Refunding Bonds,
Series 1993A (GNMA Collateralized - Meadowview Apartments),
6.125%, 5/20/28
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 3.2%
4,805 California Housing Finance Agency, Single Family Mortgage 8/07 at 101 1/2 AAA 4,995,951
Bonds II, 1997 Series C-2, 5.625%, 8/01/20 (Alternative
Minimum Tax)
1,395 California Housing Finance Agency, Home Mortgage Revenue 2/06 at 102 AAA 1,467,847
Bonds, 1996 Series E, 6.150%, 8/01/25 (Alternative Minimum Tax)
14,200 California Housing Finance Agency, Home Mortgage Revenue 2/09 at 32 1/8 AAA 2,758,634
Bonds, Series 1999B, 0.000%, 2/01/30 (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 11.9%
1,460 ABC Unified School District (Los Angeles County, California), 8/10 at 101 AAA 1,643,274
General Obligation Bonds, Election of 1997, Series B,
5.750%, 8/01/16
485 State of California, General Obligation Veterans Welfare Bonds, 12/03 at 102 AAA 491,824
Series 1997BH, 5.500%, 12/01/24 (Alternative Minimum Tax)
15
Nuveen Insured California Premium Income Municipal Fund 2, Inc. (NCL) (continued)
Portfolio of Investments August 31, 2001
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL (continued)
State of California, Various Purpose General Obligation Bonds:
$ 7,995 5.750%, 3/01/22 3/10 at 101 AAA $8,781,948
2,500 5.500%, 9/01/24 9/09 at 101 AAA 2,663,350
2,000 5.750%, 3/01/27 3/10 at 101 AAA 2,189,260
2,575 Calipatria Unified School District (Imperial County, California), 8/06 at 102 AAA 2,812,673
General Obligation Bonds, 1996 Series A, 5.625%, 8/01/13
3,000 Escondido Union High School District (San Diego County, 11/06 at 102 AAA 3,339,060
California), General Obligation Bonds, Election of 1996,
5.700%, 11/01/10
Fresno Unified School District (Fresno County, California),
General Obligation Bonds, Election of 1995, Series 2001F:
1,065 5.125%, 8/01/21 8/09 at 102 AAA 1,105,214
1,160 5.125%, 8/01/22 8/09 at 102 AAA 1,198,210
1,220 5.125%, 8/01/23 8/09 at 102 AAA 1,257,259
1,000 5.125%, 8/01/25 8/09 at 102 AAA 1,027,350
1,500 Hacienda La Puente Unified School District, County of Los Angeles, 8/10 at 101 AAA 1,561,710
California, General Obligation Bonds, Election of 2000,
Series A, 5.250%, 8/01/25
1,750 Lake Tahoe Unified School District (El Dorado County, California), 8/09 at 100 AAA 1,814,698
General Obligation Bonds, Election of 1999, Series A,
5.250%, 8/01/24
2,000 Unified School District (City of Los Angeles, California), General 7/08 at 102 AAA 2,042,120
Obligation Bonds, Series 1997A, 5.000%, 7/01/21
1,850 Sacramento City Unified School District (Sacramento County, 7/09 at 102 Aaa 2,056,460
California), General Obligation Bonds, Series 2000A,
5.750%, 7/01/18
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 40.7%
3,620 Alameda County Public Facilities Corporation, California, 9/06 at 102 AAA 4,095,378
Certificates of Participation (1991 Financing Project),
6.000%, 9/01/21
6,985 County of Alameda, California, 1993 Refunding Certificates 12/03 at 102 AAA 7,618,540
of Participation (Santa Rita Jail Project), 5.700%, 12/01/14
Anaheim Public Financing Authority, California, Lease Revenue
Bonds (Anaheim Public Improvements Project), Subordinate Lease
Revenue Bonds, 1997 Series C:
5,130 0.000%, 9/01/18 No Opt. Call AAA 2,244,170
8,000 0.000%, 9/01/21 No Opt. Call AAA 2,911,120
1,800 California Public School District Financing Authority, Lease Revenue 9/06 at 102 AAA 1,961,424
Bonds (Southern Kern Unified School District Projects),
Series 1996B, 5.800%, 9/01/16
5,250 State Public Works Board of the State of California, Lease Revenue 1/06 at 100 AAA 5,376,315
Bonds, Department of Corrections, 1996 Series A (California
Substance Abuse Treatment Facility and State Prison at
Corcoran and Corcoran II), 5.250%, 1/01/21
3,450 State Public Works Board of the State of California, Lease Revenue 11/09 at 101 AAA 3,769,470
Bonds (California Department of Health Services), 1999 Series A
(Richmond Laboratory Project), 5.750%, 11/01/24
5,000 Community Redevelopment Agency of the City of Compton, 8/05 at 102 AAA 5,712,950
California, Refunding Tax Allocation Bonds (Compton
Redevelopment Project), Series 1995A (Project Tax Revenues,
Subventions, and Housing Tax Revenues), 6.500%, 8/01/13
4,000 County of Contra Costa, California, Certificates of Participation 11/07 at 102 AAA 4,241,120
(Merrithew Memorial Hospital Replacement Project), Refunding
Series of 1997, 5.500%, 11/01/22
6,000 City of El Monte, California, Department of Public Services 1/11 at 100 AAA 6,123,000
Facility Phase II, Certificates of Participation, Senior Lien
Series 2001, 5.000%, 1/01/21
3,000 Galt Schools Joint Powers Authority (Sacramento County, 11/07 at 102 AAA 3,277,800
California), 1997 Refunding Revenue Bonds (High School
and Elementary School Facilities), Series A, 5.875%, 11/01/24
5,000 Kern County Board of Education, California, Refunding Certificates 5/08 at 102 AAA 5,146,200
of Participation, 1998 Series A, 5.200%, 5/01/28
5,000 La Quinta Redevelopment Agency, California, Tax Allocation 9/07 at 102 AAA 5,133,900
Refunding Bonds (La Quinta Redevelopment Project Area No. 1),
Series 1998, 5.200%, 9/01/28
3,865 Los Angeles County Metropolitan Transportation Authority, 7/10 at 101 AAA 4,013,609
California, Proposition C Sales Tax Revenue Bonds, Second Senior
Lien Series 2000A, 5.250%, 7/01/30
16
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED (continued)
$ 2,020 Menifee Union School District (Riverside County, California), 9/06 at 102 AAA $2,210,708
Certificates of Participation (1996 School Project),
6.125%, 9/01/24
2,690 Norwalk Community Facilities Financing Authority (Los Angeles 9/05 at 102 AAA 2,927,231
County, California), Tax Allocation Refunding Revenue Bonds,
1995 Series A, 6.000%, 9/01/15
2,000 Poway Redevelopment Agency, California, Tax Allocation 12/10 at 102 AAA 2,208,760
Refunding Bonds, Paguay Redevelopment Project, Series 2000,
5.750%, 6/15/33
3,000 Puerto Rico Highway and Transportation Authority, Highway 7/03 at 101 1/2 AAA 3,025,290
Revenue Bonds, Series X, 5.000%, 7/01/22
9,000 City of Redlands, California, Certificates of Participation (1993 9/03 at 102 AAA 9,617,670
Refunding of 1986 and 1987 Projects), 5.800%, 9/01/17
5,000 San Bernardino Joint Powers Financing Authority, California, 9/09 at 102 AAA 5,405,350
Refunding Certificates of Participation (Police Station - South
Valle Refundings and 201 Building Projects), 5.500%, 9/01/20
3,500 San Francisco Bay Area Rapid Transit District, California, Sales 7/09 at 101 AAA 3,716,650
Tax Revenue Bonds, Series 1999, 5.500%, 7/01/34
1,930 Santa Margarita/Dana Point Authority, Orange County, California, No Opt. Call AAA 2,240,981
Revenue Bonds (1994 Improvement Districts Nos. 1, 2, 2A
and 8 General Obligation Bond Refinancing), Series A,
7.250%, 8/01/05
South Orange County Public Financing Authority (California),
Special Tax Revenue Bonds, 1994 Series C (Foothill Area):
3,000 8.000%, 8/15/08 No Opt. Call AAA 3,838,710
6,830 8.000%, 8/15/09 No Opt. Call AAA 8,895,460
3,855 Redevelopment Agency of Suisun City (County of Solano, 10/03 at 102 AAA 4,115,868
California), 1993 Tax Allocation Refunding Bonds (Suisun City
Redevelopment Project), 5.900%, 10/01/23
5,450 Visalia Public Finance Authority, California, Refunding Certificates 12/06 at 102 AAA 5,678,519
of Participation (Motor Vehicle License Fee Enhancement),
Series 1996A, 5.375%, 12/01/26
------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 4.1%
6,500 Foothill/Eastern Transportation Corridor Agency, California, 1/10 at 65 5/16 AAA 2,766,725
Toll Road Refunding Revenue Bonds, Series 1999, 0.000%, 1/15/18
5,000 Airports Commission of the City and County of San Francisco, 5/11 at 100 AAA 5,088,800
California, San Francisco International Airport, Second Series
Revenue Refunding Bonds, Issue 27A, 5.250%, 5/01/31
(Alternative Minimum Tax)
3,750 City of San Jose, California, Airport Revenue Bonds, Series of 1993, 3/03 at 102 AAA 3,871,200
5.700%, 3/01/18 (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED - 7.4%
3,000 Central Unified School District (Fresno County, California), 3/03 at 102 AAA 3,194,130
General Obligation Bonds, Election of 1992, 5.625%, 3/01/18
(Pre-refunded to 3/01/03)
4,320 County of Riverside, California, Single Family Mortgage Revenue No Opt. Call AAA 6,108,826
Bonds (GNMA Mortgage-Backed Securities Program), Issue B
of 1987, 8.625%, 5/01/16 (Alternative Minimum Tax)
9,000 Airports Commission of the City and County of San Francisco, 5/04 at 101 AAA 9,908,550
California, San Francisco International Airport, Second Series
Revenue Bonds, Issue 8B, 6.100%, 5/01/20 (Pre-refunded to 5/01/04)
1,570 City of Torrance, California, Floating Rate Demand Hospital Revenue 12/05 at 100 AAA 1,720,312
Bonds (Little Company of Mary Hospital), 1985 Series A,
7.100%, 12/01/15 (Pre-refunded to 12/01/05)
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 7.0%
3,740 California Pollution Control Financing Authority, Pollution Control 9/09 at 101 AAA 3,825,384
Revenue Refunding Bonds (Southern California Edison Company),
1999 Series B, 5.450%, 9/01/29
3,215 Modesto Irrigation District Financing Authority (California), 10/06 at 102 AAA 3,551,964
Refunding Revenue Bonds, Series A, 6.000%, 10/01/15
1,790 Sacramento City Financing Authority (California), 1999 Capital 12/09 at 102 AAA 1,991,286
Improvement Revenue Bonds (Solid Waste and Redevelopment
Projects), 5.800%, 12/01/19
3,500 Sacramento Municipal Utility District (California), Electric Revenue 8/06 at 102 AAA 3,706,885
Bonds, 1996 Series J, 5.600%, 8/15/24
6,650 Turlock Irrigation District (California), Revenue Refunding Bonds, 7/02 at 100 AAA 6,799,093
Series 1992-A, 5.750%, 1/01/18
17
Nuveen Insured California Premium Income Municipal Fund 2, Inc. (NCL) (continued)
Portfolio of Investments August 31, 2001
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 7.8%
$ 3,530 Castaic Lake Water Agency (California), Refunding Revenue No Opt. Call AAA $4,051,769
Certificates of Participation (Water System Improvement
Projects), Series 1994A, 8.000%, 8/01/04
2,975 Chino Basin Regional Financing Authority (California), Revenue 8/04 at 102 AAA 3,276,933
Bonds, Series 1994 (Chino Basin Municipal Water District Sewer
System Project), 6.000%, 8/01/16
2,775 Pomona Public Financing Authority (California), 1999 Revenue 5/09 at 101 AAA 2,949,603
Bonds, Series AC (Water Facilities Project), 5.500%, 5/01/29
1,000 Sacramento County Sanitation Districts Financing Authority 6/10 at 101 AAA 1,083,450
(California), Revenue Bonds, Series 2000A (Sacramento Regional
County Sanitation District), 5.500%, 12/01/20
2,900 City and County of San Francisco (California), Sewer Revenue 10/02 at 102 AAA 2,994,392
Refunding Bonds, Series 1992, 5.500%, 10/01/15
2,000 South San Joaquin Irrigation District (San Joaquin County, 1/03 at 102 AAA 2,073,880
California), 1993 Refunding Revenue Certificates of Participation
(1987 Project and 1992 Project), 5.500%, 1/01/15
5,410 City of Tulare, California, 1996 Sewer Revenue Bonds, 11/06 at 102 AAA 5,830,790
5.750%, 11/15/21
------------------------------------------------------------------------------------------------------------------------------------
$ 294,590 Total Investments (cost $258,720,286) - 98.8% 281,186,273
=============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.2% 3,446,738
--------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $284,633,011
====================================================================================================================
All of the bonds in the portfolio are either covered by
Original Issue Insurance, Secondary Market Insurance or
Portfolio Insurance, or are backed by an escrow or trust
containing sufficient U.S. Government or U.S. Government
agency securities, any of which ensure the timely payment of
principal and interest.
* Optional Call Provisions (not covered by the report of
independent auditors): Dates (month and year) and prices of
the earliest optional call or redemption. There may be other
call provisions at varying prices at later dates.
** Ratings (not covered by the report of independent auditors):
Using the higher of Standard & Poor's or Moody's rating.
See accompanying notes to financial statements.
18
Nuveen California Premium Income Municipal Fund (NCU)
Portfolio of
Investments August 31, 2001
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
HEALTHCARE - 12.4%
$ 5,150 California Health Facilities Financing Authority, Hospital Revenue 5/03 at 102 BBB+ $5,215,354
Bonds (Downey Community Hospital), Series 1993,
5.750%, 5/15/15
8,100 California Statewide Community Development Authority, Revenue No Opt. Call AAA 8,382,690
Refunding Bonds (Sherman Oaks Project), Series 1998A,
5.000%, 8/01/22
2,000 City of Loma Linda, California, Hospital Revenue Bonds (Loma Linda 12/03 at 102 BB- 1,958,480
University Medical Center Project), Series 1993A, 6.000%, 12/01/06
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY - 11.5%
2,000 California Statewide Communities Development Authority, Apartment 7/08 at 101 BBB 2,009,680
Development Revenue Refunding Bonds (Irvine Apartment
Communities, L.P.), Series 1998A, 5.250%, 5/15/25 (Mandatory
put 5/15/13)
7,325 The Community Redevelopment Agency of the City of Los Angeles, 6/05 at 105 AAA 8,244,361
California, Multifamily Housing Revenue Refunding Bonds,
1995 Series A (Angelus Plaza Project), 7.400%, 6/15/10
3,910 City of Stanton, California, Multifamily Housing Revenue Bonds 8/07 at 102 AAA 4,107,064
(Continental Gardens Apartments), Series 1997, 5.625%, 8/01/29
(Alternative Minimum Tax) (Mandatory put 8/01/09)
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 7.3%
3,090 California Housing Finance Agency, Single Family Mortgage 2/07 at 102 AAA 3,271,538
Bonds II, 1997 Series A-1, 6.000%, 8/01/20 (Alternative
Minimum Tax)
1,000 California Housing Finance Agency, Home Mortgage Revenue 8/04 at 102 Aa2 1,055,210
Bonds, 1994 Series A, 6.550%, 8/01/26
1,000 California Housing Finance Agency, Home Mortgage Revenue 8/05 at 102 AAA 1,036,020
Bonds, 1994 Series F-3, 6.100%, 8/01/15 (Alternative
Minimum Tax)
2,000 California Housing Finance Agency, Home Mortgage Revenue 2/07 at 102 AAA 2,132,260
Bonds, 1997 Series B, 6.000%, 8/01/16 (Alternative
Minimum Tax)
1,400 California Rural Home Mortgage Finance Authority, Single No Opt. Call AAA 1,633,324
Family Mortgage Revenue Bonds (Mortgage-Backed Securities
Program), 1996 Series C, 7.500%, 8/01/27 (Alternative
Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 14.2%
4,000 State of California, General Obligation Veterans Welfare Bonds, 6/04 at 101 AA- 3,984,560
Series BR, 5.300%, 12/01/29 (Alternative Minimum Tax)
3,000 Pomona Unified School District, California, General Obligation 8/11 at 103 AAA 3,538,350
Refunding Bonds, Series 1997A, 6.150%, 8/01/15
6,500 Commonwealth of Puerto Rico, General Obligation Public 7/10 at 100 AAA 7,148,570
Improvement Bonds of 2000, 5.750%, 7/01/21
3,000 San Diego Unified School District, California, 2000 General 7/10 at 100 AAA 3,090,030
Obligation Bonds, Election of 1998, Series B, 5.125%, 7/01/22
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 31.6%
4,500 Bonita Canyon Public Facilities Financing Authority (California), 9/01 at 103 N/R 4,350,780
Community Facilities District No. 98-1 Special Tax Bonds,
Series 1998, 5.375%, 9/01/28
5,920 State Public Works Board of the State of California, Lease Revenue 11/09 at 101 AAA 6,448,715
Bonds (Department of Veterans Affairs of the State of
California - Southern California Veterans Home - Chula Vista
Facility), 1999 Series A, 5.600%, 11/01/19
2,480 City of Carlsbad (California), Assessment District No. 96-1 9/01 at 102 N/R 2,454,183
Limited Obligation Improvement Bonds (Rancho Carillo),
5.500%, 9/02/28
1,000 Carson Redevelopment Agency (California), Refunding 10/03 at 102 BBB 1,048,710
Tax Allocation Bonds (Redevelopment Project Area No. 2),
Series 1993, 5.875%, 10/01/09
3,500 City of Livermore Redevelopment Agency (California), Tax 8/11 at 100 AAA 3,542,175
Allocation Revenue Bonds (Livermore Redevelopment Project
Area), Series 2001A, 5.000%, 8/01/26
19
Nuveen California Premium Income Municipal Fund (NCU) (continued)
Portfolio of Investments August 31, 2001
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED (continued)
$ 2,160 Community Redevelopment Financing Authority of the Community 6/03 at 102 BB $2,078,978
Redevelopment Agency of the City of Los Angeles, California,
Grand Central Square Multifamily Housing Bonds, 1993 Series A,
5.750%, 12/01/13 (Alternative Minimum Tax)
1,000 Community Facilities District No. 88-1 of the City of Poway, 8/08 at 102 N/R 1,117,950
California (Parkway Business Center), Special Tax Refunding
Bonds, Series 1998, 6.500%, 8/15/09
1,200 City of Richmond Reassessment District No. 855, California, 9/01 at 103 N/R 1,242,480
Limited Obligation Refunding Improvement Bonds (Atlas Road
West and Interchange), 6.600%, 9/02/19
5,000 Redevelopment Agency for the County of Riverside, California, 10/11 at 102 AAA 5,191,850
2001 Tax Allocation Bonds (Jurupa Valley Project Area),
5.150%, 10/01/21
6,200 Sacramento City Finance Authority (California), Lease Revenue No Opt. Call AA- 6,658,304
Refunding Bonds, Series 1993B, 5.400%, 11/01/20
San Marcos Public Facilities Authority (California), Refunding
Revenue Bonds, Series 1998:
1,500 5.800%, 9/01/18 9/08 at 101 N/R 1,520,025
2,000 5.800%, 9/01/27 9/08 at 101 N/R 2,004,300
2,000 City of Vista, California, Mobile Home Park Subordinate Revenue 3/09 at 102 N/R 1,832,640
Bonds (Vista Manor Mobile Home Park Project), Series 1999B,
5.750%, 3/15/29
------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 4.1%
2,750 Airports Commission of the City and County of San Francisco, 5/04 at 102 AAA 2,988,755
California, San Francisco International Airport, Second Series
Revenue Bonds, Issue 5, 6.500%, 5/01/24 (Alternative
Minimum Tax)
2,000 Airports Commission of the City and County of San Francisco, 5/06 at 102 AAA 2,101,040
California, San Francisco International Airport, Second Series
Revenue Bonds, Issue 10A, 5.700%, 5/01/26 (Alternative
Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED - 9.8%
1,500 ABAG Finance Authority for Nonprofit Corporations, California, No Opt. Call AAA 1,598,475
Certificates of Participation (Stanford University Hospital),
Series 1993, 5.250%, 11/01/20
3,200 State Public Works Board of the State of California, Lease Revenue 10/04 at 102 A1*** 3,622,400
Bonds (The Trustees of the California State University),
1994 Series A (Various California State University Projects),
6.375%, 10/01/14 (Pre-refunded to 10/01/04)
4,000 California Statewide Communities Development Authority, 8/02 at 102 A3*** 4,214,360
Hospital Revenue Certificates of Participation (Cedars-Sinai
Medical Center), Series 1992, 6.500%, 8/01/15 (Pre-refunded
to 8/01/02)
2,565 City of Torrance, California, Floating Rate Demand Hospital Revenue 12/05 at 100 AAA 2,810,573
Bonds (Little Company of Mary Hospital), 1985 Series A,
7.100%, 12/01/15 (Pre-refunded to 12/01/05)
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 3.2%
1,000 California Pollution Control Financing Authority, Pollution Control 12/02 at 102 AAA 1,035,400
Revenue Bonds (Southern California Edison Company),
1992 Series B, 6.400%, 12/01/24 (Alternative Minimum Tax)
3,000 Merced Irrigation District, California, 2001 Electric System 9/05 at 102 N/R 3,021,420
Refunding Revenue Bonds (Electric System Project),
6.500%, 9/01/22
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 4.4%
5,000 Culver City, California, Wastewater Facilities Refunding Revenue 9/09 at 102 AAA 5,448,600
Bonds, 1999 Series A, 5.700%, 9/01/29
------------------------------------------------------------------------------------------------------------------------------------
$ 116,950 Total Investments (cost $116,746,883) - 98.5% 123,139,604
=============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.5% 1,927,629
--------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $125,067,233
====================================================================================================================
* Optional Call Provisions (not covered by the report of
independent auditors): Dates (month and year) and
prices of the earliest optional call or redemption.
There may be other call provisions at varying prices at
later dates.
** Ratings (not covered by the report of independent
auditors): Using the higher of Standard & Poor's or
Moody's rating.
*** Securities are backed by an escrow or trust containing
sufficient U.S. Government or U.S. Government agency
securities which ensures the timely payment of
principal and interest. Securities are normally
considered to be equivalent to AAA rated securities.
N/R Investment is not rated.
See accompanying notes to financial statements.
20
Nuveen California Dividend Advantage Municipal Fund (NAC)
Portfolio of
Investments August 31, 2001
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES - 2.3%
$ 5,000 California Statewide Communities Development Authority, 11/09 at 102 N/R $5,256,200
Certificates of Participation (Pride Industries and Pride One,
Inc.), 7.250%, 11/01/29
Tobacco Securitization Authority of Northern California, Tobacco
Settlement Asset-Backed Bonds, Series 2001A:
2,500 5.250%, 6/01/31 6/11 at 100 A1 2,525,450
4,500 5.375%, 6/01/41 6/11 at 100 A1 4,540,410
------------------------------------------------------------------------------------------------------------------------------------
EDUCATION AND CIVIC ORGANIZATIONS - 1.8%
3,000 Long Beach Bond Finance Authority, California, Lease Revenue 11/11 at 100 AAA 3,300,270
Refunding Bonds (The Aquarium of the South Pacific),
5.500%, 11/01/17
6,000 The Regents of the University of California, Multiple Purpose 9/08 at 101 AA 6,433,380
Project Revenue Bonds, Series K, 5.000%, 9/01/12
------------------------------------------------------------------------------------------------------------------------------------
HEALTHCARE - 12.6%
8,400 California Health Facilities Financing Authority, Kaiser Permanente 10/08 at 101 A 8,709,708
Revenue Bonds, Series 1998B, 5.250%, 10/01/14 (Optional
put 10/01/08)
15,000 California Health Facilities Financing Authority, Revenue Bonds 12/09 at 101 A3 16,190,850
(Cedars-Sinai Medical Center), Series 1999A, 6.125%, 12/01/30
18,755 California Health Facilities Financing Authority, Revenue Bonds 11/08 at 101 AAA 18,870,531
(USCF - Stanford Health Care), 1998 Series A, 5.000%, 11/15/28
8,000 Central California Joint Powers Health Financing Authority, 2/10 at 101 BBB+ 8,452,480
Certificates of Participation (Community Hospitals of Central
California Obligated Group Project), Series 2000, 6.000%, 2/01/30
10,500 City of Duarte, California, Certificates of Participation (City of 4/09 at 101 BBB 10,168,725
Hope National Medical Center), Series 1999A, 5.250%, 4/01/31
4,000 City of Upland, California, Certificates of Participation, 1/04 at 102 A 4,165,240
1993 Series (San Antonio Community Hospital), 5.250%, 1/01/08
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY - 8.7%
15,000 California Statewide Communities Development Authority, 7/08 at 101 BBB 15,256,050
Apartment Development Revenue Refunding Bonds (Irvine Apartment
Communities, L.P.), Series 1998A, 4.900%, 5/15/25 (Mandatory
put 5/15/08)
10,000 California Statewide Communities Development Authority, No Opt. Call BBB+ 10,401,500
Multifamily Housing Refunding Bonds (Archstone Pelican Point
Apartments), Issue 1999H Archstone Communities Trust,
5.300%, 6/01/29 (Mandatory put 6/01/08)
5,000 County of Contra Costa (California), Multifamily Housing 6/09 at 102 N/R 4,844,550
Revenue Bonds (Delta View Apartments), Series 1999C,
6.750%, 12/01/30 (Alternative Minimum Tax)
15,000 Housing Authority of the County of San Bernardino (California), No Opt. Call A3 15,345,900
Multifamily Housing Revenue Refunding Bonds (Equity
Residential/Redlands Lawn and Tennis Apartments), Issue 1999A,
5.200%, 6/15/29 (Mandatory put 6/15/09)
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 3.8%
42,155 California Housing Finance Agency, Single Family Mortgage 2/09 at 31 1/8 AAA 8,564,210
Bonds II, 1999 Series D2, 0.000%, 2/01/29 (Alternative Minimum Tax)
11,500 California Housing Finance Agency, Home Mortgage Revenue 2/09 at 101 1/2 AAA 11,575,900
Bonds, Series 1998E, 5.250%, 2/01/33 (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
LONG-TERM CARE - 1.6%
8,500 Riverside County Public Financing Authority (California), 5/09 at 101 BBB- 8,349,720
Certificates of Participation (Air Force Village West, Inc.),
5.800%, 5/15/29
21
Nuveen California Dividend Advantage Municipal Fund (NAC) (continued)
Portfolio of Investments August 31, 2001
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 7.5%
$ 9,000 State of California, Various Purpose General Obligation Bonds, 4/09 at 101 AAA $8,829,990
4.750%, 4/01/29
18,500 Los Angeles Unified School District, California, General Obligation 7/09 at 101 AAA 19,247,770
Bonds, Election of 1997, Series 1999C, 5.250%, 7/01/24
3,600 Los Angeles Unified School District, California, General Obligation 7/10 at 100 AAA 4,032,936
Bonds, Election of 1997, Series 2000D, 5.625%, 7/01/14
1,750 Oakland Unified School District, Alameda County, California, General 8/08 at 101 AAA 1,805,038
Obligation Bonds, Series 2001, 5.125%, 8/01/21
5,000 Commonwealth of Puerto Rico, General Obligation Public 7/10 at 100 AAA 5,568,650
Improvement Bonds of 2000, 5.750%, 7/01/16
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 19.2%
8,665 Bonita Canyon Public Facilities Financing Authority (California), 9/01 at 103 N/R 8,377,669
Community Facilities District No. 98-1 Special Tax Bonds,
Series 1998, 5.375%, 9/01/28
13,290 Community Facilities District No. 1, Mira Loma Area of Jurupa 9/08 at 102 AAA 13,116,034
(California), 1998 Special Tax Bonds, 4.750%, 9/01/24
(Optional put 9/01/10)
5,500 County of Los Angeles (California), Certificates of Participation 9/08 at 101 AAA 5,437,905
(1998 Disney Parking Refunding Project), 4.750%, 3/01/23
5,000 Los Angeles County Metropolitan Transportation Authority 7/08 at 101 AAA 5,065,950
(California), Proposition C Sales Tax Revenue Refunding Bonds,
Second Senior Bonds, Series 1998-A, 5.000%, 7/01/23
3,465 Los Angeles County Metropolitan Transportation Authority 7/11 at 101 AAA 3,505,263
(California), Proposition A First Tier Senior Sales Tax
Revenue Bonds, Series 2001A, 5.000%, 7/01/27
14,160 Oakland State Building Authority (California), Lease Revenue Bonds 4/08 at 101 AAA 14,361,780
(Elihu M. Harris State Office Building), 1998 Series A,
5.000%, 4/01/23
4,000 Orange County Local Transportation Authority (California), No Opt. Call AAA 4,531,400
Measure M Sales Tax Revenue Refunding Bonds, Limited Tax
Bonds, Second Senior Bonds, Series 1997A, 5.700%, 2/15/08
8,100 Poway Redevelopment Agency (California), Tax Allocation Refunding 12/10 at 102 AAA 8,945,478
Bonds (Paguay Redevelopment Project), Series 2000,
5.750%, 6/15/33
11,925 Riverside County Public Financing Authority (California), No Opt. Call N/R 12,847,041
Reassessment Revenue Bonds (Rancho Village Project/Assessment
District No. 159), 1999 Series B (Junior Lien Bonds),
6.000%, 9/02/07
25,060 Redevelopment Agency of the City of San Jose (California), Tax 8/08 at 102 A 25,586,511
Allocation Bonds (Merged Area Redevelopment Project),
Series 1998, 5.250%, 8/01/29
------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 16.3%
21,150 Foothill/Eastern Transportation Corridor Agency, California, 1/10 at 101 BBB- 21,994,731
Toll Road Refunding Revenue Bonds, Series 1999, 5.750%, 1/15/40
8,515 Harbor Department of the City of Los Angeles, California, Revenue 8/11 at 100 AAA 9,039,269
Refunding Bonds, Series 2001B, 5.500%, 8/01/18
(Alternative Minimum Tax)
23,000 Port of Oakland, California, Revenue Bonds, 2000 Series K, 5/10 at 100 AAA 24,777,670
5.750%, 11/01/29 (Alternative Minimum Tax)
5,000 Airports Commission of the City and County of San Francisco, 5/06 at 101 AAA 5,208,200
California, San Francisco International Airport, Second Series
Revenue Bonds, Issue 13B, 5.625%, 5/01/21 (Alternative
Minimum Tax)
23,275 Airports Commission of the City and County of San Francisco, 5/10 at 101 AAA 25,040,176
California, San Francisco International Airport, Second Series
Revenue Bonds, Issue 25, 5.750%, 5/01/30 (Alternative
Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 8.8%
10,000 Merced Irrigation District, California, 2001 Electric System 9/05 at 102 N/R 10,154,800
Refunding Revenue Bonds (Electric System Project),
6.750%, 9/01/31
10,500 Northern California Power Agency, Hydroelectric Project Number 7/08 at 101 AAA 10,807,965
One Revenue Bonds, 1998 Refunding Series A, 5.200%, 7/01/32
10,500 Puerto Rico Electric Power Authority, Power Revenue Bonds, 7/08 at 101 1/2 A- 10,540,215
Series DD, 5.000%, 7/01/28
15,000 Sacramento Municipal Utility District (California), Electric Revenue 7/04 at 101 A 15,187,050
Refunding Bonds, 1999 Series M, 5.250%, 7/01/28
22
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 16.1%
$ 12,000 Carmichael Water District (Sacramento County, California), 9/09 at 102 AAA $12,282,960
1999 Water Revenue Certificates of Participation, 5.125%, 9/01/29
7,200 Castaic Lake Water Agency, California, Revenue Certificates of 8/09 at 101 AAA 7,354,728
Participation (Water System Improvement Project), Series 1999A,
5.125%, 8/01/30
4,985 East Bay Municipal Utility District (Alameda and Contra Costa 6/08 at 101 AAA 4,892,080
Counties, California), Wastewater System Subordinated Revenue
Bonds, Series 1998, 4.750%, 6/01/28
4,000 East Bay Municipal Utility District (Alameda and Contra Costa 6/08 at 101 AAA 3,910,640
Counties, California), Water System Subordinated Revenue Bonds,
Series 1998, 4.750%, 6/01/34
20,000 Department of Water and Power of the City of Los Angeles, 7/11 at 100 AA 20,243,600
California, Waterworks Revenue Bonds, Series 2001A Refunding,
5.125%, 7/01/41
13,425 The Metropolitan Water District of Southern California, Water 1/08 at 101 AA 13,458,563
Revenue Bonds, 1997 Authorization, Series A, 5.000%, 7/01/37
14,000 Orange County Water District (California), Revenue Certificates 8/09 at 101 AA 14,657,860
of Participation, Series 1999A, 5.375%, 8/15/29
8,250 Pico Rivera Water Authority (California), Revenue Bonds, 12/11 at 102 N/R 8,415,410
2001 Series A, 6.250%, 12/01/32
------------------------------------------------------------------------------------------------------------------------------------
$ 540,625 Total Investments (cost $493,487,460) - 98.7% 522,176,406
=============-----------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 0.0%
$ 100 California Statewide Communities Development Authority, VMIG-1 100,000
============= Certificates of Participation (Northern California Retired Officers
Community), Variable Rate Demand Bonds, 2.300%, 6/01/26+
--------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.3% 6,920,664
--------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $529,197,070
====================================================================================================================
* Optional Call Provisions (not covered by the report of
independent auditors): Dates (month and year) and
prices of the earliest optional call or redemption.
There may be other call provisions at varying prices at
later dates.
** Ratings (not covered by the report of independent
auditors): Using the higher of Standard & Poor's or
Moody's rating.
N/R Investment is not rated.
+ Security has a maturity of more than one year, but has
variable rate and demand features which qualify it as a
short-term security. The rate disclosed is that
currently in effect. This rate changes periodically
based on market conditions or a specified market index.
See accompanying notes to financial statements.
23
Nuveen California Dividend Advantage Municipal Fund 2 (NVX)
Portfolio of
Investments August 31, 2001
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES - 0.9%
$ 3,000 Tobacco Securitization Authority of Northern California, Tobacco 6/11 at 100 A1 $3,026,940
Settlement Asset-Backed Bonds, Series 2001A, 5.375%, 6/01/41
------------------------------------------------------------------------------------------------------------------------------------
EDUCATION AND CIVIC ORGANIZATIONS - 13.3%
5,000 California Educational Facilities Authority, Revenue Bonds, 6/11 at 101 AAA 5,219,300
Stanford University, Series Q, 5.250%, 12/01/32
California Educational Facilities Authority, Revenue Bonds,
Loyola Marymount University, Series 2001A Refunding:
7,620 0.000%, 10/01/26 No Opt. Call Aaa 2,074,393
7,365 0.000%, 10/01/27 No Opt. Call Aaa 1,896,414
4,120 0.000%, 10/01/28 No Opt. Call Aaa 1,005,733
15,000 California Educational Facilities Authority, Student Loan Revenue 3/08 at 102 Aaa 15,290,700
Bonds (California Loan Program), Series 2001A, 5.400%, 3/01/21
(Alternative Minimum Tax)
9,000 Long Beach Bond Finance Authority, California, Lease Revenue 11/11 at 101 AAA 9,374,040
Refunding Bonds (The Aquarium of the South Pacific),
5.250%, 11/01/30
9,000 The Regents of the University of California, Multiple Purpose 9/08 at 101 AA 9,353,970
Project Revenue Bonds, Series K, 5.300%, 9/01/30
------------------------------------------------------------------------------------------------------------------------------------
HEALTHCARE - 3.2%
5,000 California Health Facilities Financing Authority, Kaiser Permanente 5/03 at 102 A 5,048,800
Revenue Bonds, 1993 Series C, 5.600%, 5/01/33
3,000 Central California Joint Powers Health Financing Authority, 2/10 at 101 BBB+ 3,169,680
Certificates of Participation (Community Hospitals of Central
California Obligated Group Project), Series 2000, 6.000%, 2/01/30
2,500 City of Torrance, California, Revenue Bonds (Torrance Memorial 6/11 at 101 A+ 2,549,600
Medical Center), Series 2001A, 5.500%, 6/01/31
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY - 4.9%
10,200 California Statewide Communities Development Authority, 12/01 at 100 N/R 10,202,652
Multifamily Housing Revenue Bonds (Citrus Gardens Apartments
Project), Series 2001J, 6.250%, 6/01/37 (Mandatory put 6/01/02)
5,962 California Statewide Communities Development Authority, 6/11 at 102 AAA 6,159,700
Multifamily Housing Revenue Refunding Bonds (Claremont
Village Apartments), Series 2001D, 5.500%, 6/01/31 (Mandatory
put 6/01/16)
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 1.9%
6,000 California Rural Home Mortgage Finance Authority, Single Family 6/11 at 102 AAA 6,180,300
Mortgage Revenue Bonds (Mortgage-Backed Securities Program),
2001 Series A, 5.650%, 12/01/31 (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
LONG-TERM CARE - 1.5%
4,650 Redevelopment Agency of the City and County of San Francisco, 10/11 at 100 Aaa 4,857,762
California, Multifamily Housing Revenue Bonds (Kokoro Assisted
Living Project), GNMA Series 2001A, 5.675%, 4/20/43
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 15.3%
5,595 State of California, Various Purpose General Obligation Bonds, 12/10 at 100 Aa3 5,825,402
5.250%, 12/01/22
9,000 State of California, Veterans General Obligation Bonds, Series BV, 6/06 at 101 AAA 9,341,730
5.600%, 12/01/32
8,330 Los Angeles Unified School District, California, General Obligation 7/10 at 100 AAA 8,744,418
Bonds, Election of 1997, Series 2000D, 5.375%, 7/01/25
275 Sacramento City Unified School District, Sacramento County, 7/10 at 102 AAA 277,849
California, General Obligation Bonds, Election of 1999,
Series B of 2001, 5.000%, 7/01/30
14,190 City of San Jose, California, General Obligation Bonds (Libraries 9/11 at 100 AA+ 14,524,600
and Parks Projects), Series 2001, 5.125%, 9/01/31
24
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL (continued)
$ 4,050 City of Santa Rosa High School District, County of Sonoma, 5/11 at 101 AAA $4,246,547
California, General Obligation Bonds, Series 2001, 5.300%, 5/01/26
7,600 Southwestern Community College District, San Diego County, 8/11 at 101 AAA 8,046,500
California, General Obligation Bonds, Series 2001, 5.375%, 8/01/25
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 30.6%
9,000 Anitoch Area Public Facilities Financing Authority, California, 8/08 at 103 AAA 9,370,260
Special Tax Bonds (Community Facilities District No. 1989-1),
Series 2001, 5.250%, 8/01/25
2,885 County of Contra Costa Public Financing Authority, California, 8/08 at 101 AAA 3,022,239
Lease Revenue Bonds (Refunding and Various Capital Facilities
Projects), Series 1998A, 5.350%, 8/01/24
7,595 City of Encinitas Public Financing Authority, California, Lease 4/08 at 102 AAA 7,857,103
Revenue Bonds (Acquisition Project), Series 2001A, 5.250%, 4/01/31
3,490 City of Fontana, Village of Heritage, California, Senior Special 9/08 at 102 AAA 3,712,522
Tax Refunding Bonds (Community Facilities District No. 2),
1998 Series A, 5.250%, 9/01/17
8,000 Los Angeles County Metropolitan Transportation Authority 7/08 at 101 AAA 8,105,520
(California), Proposition C Sales Tax Revenue Refunding Bonds,
Second Senior Bonds, Series 1998-A, 5.000%, 7/01/23
5,670 City of Oakland Joint Powers Financing Authority, California, No Opt. Call AAA 6,439,646
Lease Revenue Refunding Bonds, Series 2001 (Oakland
Convention Centers), 5.500%, 10/01/14
9,000 Redevelopment Agency for the County of Riverside, California, 10/11 at 102 AAA 9,330,930
2001 Tax Allocation Bonds (Jurupa Valley Project Area),
5.250%, 10/01/35
9,000 Sacramento City Financing Authority, California, 2001 Capital 6/11 at 100 AAA 9,079,560
Improvement Revenue Bonds, Series A (Water and Capital
Improvement Projects), 5.000%, 12/01/32
5,000 Santa Ana Financing Authority, California, Revenue Refunding 9/08 at 102 AAA 5,162,800
Bonds (South Harbor Boulevard Project), Series 1998A,
5.000%, 9/01/19
Santa Clara Valley Transportation Authority, California, Sales
Tax Revenue Bonds, Series 2001A:
16,090 5.000%, 6/01/25 6/11 at 100 AAA 16,293,217
15,345 5.000%, 6/01/26 6/11 at 100 AAA 15,526,992
3,045 Redevelopment Agency of the City of Yucaipa, California, 5/11 at 102 N/R 3,049,476
Mobile Home Park Revenue Bonds (Rancho del Sol and
Grandview), Series 2001A, 6.750%, 5/15/36
5,600 City of Yucaipa, Chapman Heights, County of San Bernardino, 9/09 at 102 N/R 5,386,808
California, 1998 Special Tax Bonds (Community Facilities
District No. 98-1), 6.000%, 9/01/28
------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 5.2%
5,500 California Statewide Communities Development Authority, 10/11 at 100 Ba1 5,559,015
Special Facility Revenue Bonds (United Air Lines, Inc. -
Los Angeles International Airport Cargo Project), Series 2001,
6.250%, 10/01/35 (Alternative Minimum Tax)
3,840 Sacramento-Yolo Port District, Counties of Sacramento and 7/08 at 101 Baa2 3,939,341
Yolo, California, Port Facilities Refunding and Improvement
Revenue Bonds, Series 2001, 5.125%, 7/01/14
1,750 Airports Commission of the City and County of San Francisco, 5/09 at 101 AAA 1,745,905
California, San Francisco International Airport, Second Series
Revenue Bonds, Issue 23B Bonds, 5.000%, 5/01/30 (Alternative
Minimum Tax)
6,100 Airports Commission of the City and County of San Francisco, 5/10 at 101 AAA 6,216,876
California, San Francisco International Airport, Second Series
Revenue Bonds, Issue 26A, 5.250%, 5/01/30 (Alternative
Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 10.6%
5,000 California Pollution Control Financing Authority, Pollution Control 4/11 at 102 AAA 5,172,250
Refunding Revenue Bonds (Pacific Gas and Electric Company),
1996A Remarketed, 5.350%, 12/01/16 (Alternative Minimum Tax)
30,000 Sacramento Municipal Utility District, California, Electric Revenue 8/11 at 100 AAA 30,292,200
Bonds, Series 2001N, 5.000%, 8/15/28
25
Nuveen California Dividend Advantage Municipal Fund 2 (NVX) (continued)
Portfolio of Investments August 31, 2001
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 11.2%
$ 15,000 East Bay Municipal Utility District, Alameda and Contra Costa 6/11 at 100 AAA $15,177,900
Counties, California, Water System Subordinated Revenue Bonds,
Series 2001, 5.000%, 6/01/26
13,400 Department of Water and Power of the City of Los Angeles, 7/11 at 100 AAA 13,667,732
California, Waterworks Revenue Bonds, Series 2001A Refunding,
5.125%, 7/01/41
8,350 The Metropolitan Water District of Southern California, Water 1/08 at 101 AA 8,370,874
Revenue Bonds, 1997 Authorization, Series A, 5.000%, 7/01/37
------------------------------------------------------------------------------------------------------------------------------------
$ 335,117 Total Investments (cost $314,932,501) - 98.6% 328,896,196
=============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.4% 4,544,202
--------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $333,440,398
====================================================================================================================
* Optional Call Provisions (not covered by the report of
independent auditors): Dates (month and year) and
prices of the earliest optional call or redemption.
There may be other call provisions at varying prices at
later dates.
** Ratings (not covered by the report of independent
auditors): Using the higher of Standard & Poor's or
Moody's rating.
N/R Investment is not rated.
See accompanying notes to financial statements.
26
Statement of
Net Assets August 31, 2001
INSURED INSURED CALIFORNIA CALIFORNIA CALIFORNIA
CALIFORNIA CALIFORNIA PREMIUM DIVIDEND DIVIDEND
PREMIUM INCOME PREMIUM INCOME 2 INCOME ADVANTAGE ADVANTAGE 2
(NPC) (NCL) (NCU) (NAC) (NVX)
------------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments in municipal securities,
at market value $146,174,708 $281,186,273 $123,139,604 $522,176,406 $328,896,196
Temporary investments in short-term municipal
securities, at amortized cost, which
approximates market value -- -- -- 100,000 --
Cash 456,121 305,805 628,316 265,865 1,044,556
Receivables:
Interest 2,040,609 4,077,667 1,832,380 7,027,306 4,826,978
Investments sold -- 125,043 20,600 1,615,000 --
Other assets 13,828 32,121 2,703 36,497 15,730
------------------------------------------------------------------------------------------------------------------------------------
Total assets 148,685,266 285,726,909 125,623,603 531,221,074 334,783,460
------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Accrued expenses:
Management fees 80,524 153,197 68,293 147,749 94,681
Other 82,905 96,674 102,885 190,028 156,573
Preferred share dividends payable 7,212 10,541 10,249 28,290 26,067
Common share dividends payable 446,800 833,486 374,943 1,657,937 1,065,741
------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 617,441 1,093,898 556,370 2,024,004 1,343,062
====================================================================================================================================
Net assets $148,067,825 $284,633,011 $125,067,233 $529,197,070 $333,440,398
====================================================================================================================================
Preferred shares, at liquidation value $ 45,000,000 $ 95,000,000 $ 43,000,000 $175,000,000 $110,000,000
====================================================================================================================================
Preferred shares outstanding 1,800 3,800 1,720 7,000 4,400
====================================================================================================================================
Common shares outstanding 6,425,832 12,631,158 5,771,520 23,406,348 14,787,016
====================================================================================================================================
Net asset value per Common share outstanding
(net assets less Preferred shares
at liquidation value,
divided by Common shares outstanding) $ 16.04 $ 15.01 $ 14.22 $ 15.13 $ 15.11
====================================================================================================================================
See accompanying notes to financial statements.
27
Statement of
Operations Year Ended August 31, 2001
INSURED INSURED CALIFORNIA CALIFORNIA CALIFORNIA
CALIFORNIA CALIFORNIA PREMIUM DIVIDEND DIVIDEND
PREMIUM INCOME PREMIUM INCOME 2 INCOME ADVANTAGE ADVANTAGE 2
(NPC) (NCL) (NCU) (NAC) (NVX)*
-----------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME $ 7,892,090 $14,969,625 $ 6,794,398 $27,400,148 $ 5,574,870
-----------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Management fees 931,993 1,773,249 788,275 3,222,406 767,354
Preferred shares - auction fees 112,500 237,498 107,500 437,500 79,863
Preferred shares - dividend disbursing agent fees 9,367 21,799 8,473 21,645 5,041
Shareholders' servicing agent fees and expenses 15,477 23,309 10,039 9,517 2,497
Custodian's fees and expenses 37,688 61,789 43,156 95,619 37,958
Directors'/Trustees' fees and expenses 1,823 3,990 1,486 9,804 860
Professional fees 14,758 14,911 21,366 15,826 15,896
Shareholders' reports - printing
and mailing expenses 19,301 38,251 19,166 39,331 20,243
Stock exchange listing fees 20,399 29,129 9,011 42,442 430
Investor relations expense 16,963 29,807 15,779 52,383 --
Portfolio insurance expense 13,491 2,998 -- -- --
Other expenses 11,044 16,810 10,123 17,911 1,653
-----------------------------------------------------------------------------------------------------------------------------------
Total expenses before custodian fee credit
and expense reimbursement 1,204,804 2,253,540 1,034,374 3,964,384 931,795
Custodian fee credit (14,498) (14,624) (16,758) (32,994) (18,865)
Expense reimbursement -- -- -- (1,524,812) (359,177)
-----------------------------------------------------------------------------------------------------------------------------------
Net expenses 1,190,306 2,238,916 1,017,616 2,406,578 553,753
-----------------------------------------------------------------------------------------------------------------------------------
Net investment income 6,701,784 12,730,709 5,776,782 24,993,570 5,021,117
-----------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
FROM INVESTMENTS
Net realized gain (loss) from
investment transactions (3,088) (518,300) 727,947 153,449 (604,937)
Change in net unrealized appreciation
(depreciation) of investments 6,344,071 12,002,378 4,435,492 30,026,536 13,963,695
-----------------------------------------------------------------------------------------------------------------------------------
Net gain from investments 6,340,983 11,484,078 5,163,439 30,179,985 13,358,758
-----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $13,042,767 $24,214,787 $10,940,221 $55,173,555 $18,379,875
===================================================================================================================================
* For the period March 27, 2001 (commencement of operations) through August
31, 2001.
See accompanying notes to financial statements.
28
Statement of
Changes in Net Assets
INSURED INSURED CALIFORNIA
CALIFORNIA CALIFORNIA PREMIUM
PREMIUM INCOME PREMIUM INCOME 2 INCOME
(NPC) (NCL) (NCU)
---------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
8/31/01 8/31/00 8/31/01 8/31/00 8/31/01 8/31/00
------------------------------------------------------------------------------------------------------------------------------------
OPERATIONS
Net investment income $ 6,701,784 $ 7,008,059 $ 12,730,709 $ 12,853,838 $ 5,776,782 $ 5,927,918
Net realized gain (loss) from
investment transactions (3,088) (2,371,822) (518,300) (491,139) 727,947 156,785
Change in net unrealized appreciation
(depreciation) of investments 6,344,071 4,320,269 12,002,378 5,822,864 4,435,492 686,745
------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets
from operations 13,042,767 8,956,506 24,214,787 18,185,563 10,940,221 6,771,448
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
From and in excess of net investment
income:
Common shareholders (5,501,796) (5,683,474) (9,845,915) (10,102,279) (4,535,399) (4,561,523)
Preferred shareholders (1,375,685) (1,550,742) (2,765,748) (3,064,024) (1,321,933) (1,340,162)
------------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from
distributions to shareholders (6,877,481) (7,234,216) (12,611,663) (13,166,303) (5,857,332) (5,901,685)
------------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Common shares:
Net proceeds from sale of shares -- -- -- -- -- --
Net proceeds from shares issued to
shareholders due to reinvestment
of distributions -- 89,174 53,134 124,695 106,665 130,708
Preferred shares:
Net proceeds from sale of shares -- -- -- -- -- --
------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from
capital share transactions -- 89,174 53,134 124,695 106,665 130,708
------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets 6,165,286 1,811,464 11,656,258 5,143,955 5,189,554 1,000,471
Net assets at the beginning
of period 141,902,539 140,091,075 272,976,753 267,832,798 119,877,679 118,877,208
------------------------------------------------------------------------------------------------------------------------------------
Net assets at the end of period $148,067,825 $141,902,539 $284,633,011 $272,976,753 $125,067,233 $119,877,679
------------------------------------------------------------------------------------------------------------------------------------
Undistributed (Over-distribution of) net
investment income at the end
of period $ 324,927 $ 499,867 $ 544,540 $ 425,494 $ 304,995 $ 385,545
------------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
29
Statement of
Changes in Net Assets (continued)
CALIFORNIA
CALIFORNIA DIVIDEND ADVANTAGE (NAC) DIVIDEND ADVANTAGE 2 (NVX)
---------------------------------------------------------------------
FOR THE PERIOD 3/27/01
YEAR ENDED YEAR ENDED (COMMENCEMENT OF OPERATIONS)
8/31/01 8/31/00 THROUGH 8/31/01
------------------------------------------------------------------------------------------------------------------------------------
OPERATIONS
Net investment income $ 24,993,570 $ 24,941,473 $ 5,021,117
Net realized gain (loss) from investment
transactions 153,449 (6,629,216) (604,937)
Change in net unrealized appreciation
(depreciation) of investments 30,026,536 18,810,097 13,963,695
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations 55,173,555 37,122,354 18,379,875
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
From and in excess of net investment income:
Common shareholders (18,957,806) (19,709,931) (4,258,658)
Preferred shareholders (5,398,060) (5,976,400) (765,421)
------------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from
distributions to shareholders (24,355,866) (25,686,331) (5,024,079)
------------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Common shares:
Net proceeds from sale of shares -- -- 211,280,100
Net proceeds from shares issued
to shareholders due to
reinvestment of distributions 53,132 522,953 227
Preferred shares:
Net proceeds from sale of shares -- -- 108,704,000
------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from
capital share transactions 53,132 522,953 319,984,327
------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets 30,870,821 11,958,976 333,340,123
Net assets at the beginning of period 498,326,249 486,367,273 100,275
------------------------------------------------------------------------------------------------------------------------------------
Net assets at the end of period $529,197,070 $498,326,249 $333,440,398
------------------------------------------------------------------------------------------------------------------------------------
Undistributed (Over-distribution of)
net investment income at
the end of period $ 439,325 $ (198,379) $ (2,962)
------------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
30
Notes to Financial Statements
1. GENERAL INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES
The California Funds (the "Funds") covered in this report and their
corresponding stock exchange symbols are Nuveen Insured California Premium
Income Municipal Fund, Inc. (NPC), Nuveen Insured California Premium Income
Municipal Fund 2, Inc. (NCL), Nuveen California Premium Income Municipal Fund
(NCU), Nuveen California Dividend Advantage Municipal Fund (NAC) and Nuveen
California Dividend Advantage Municipal Fund 2 (NVX). Insured California Premium
Income (NPC), Insured California Premium Income 2 (NCL) and California Dividend
Advantage (NAC) are traded on the New York Stock Exchange while California
Premium Income (NCU) and California Dividend Advantage 2 (NVX) are traded on the
American Stock Exchange. Prior to the commencement of operations of California
Dividend Advantage 2 (NVX), the Fund had no operations other than those related
to organizational matters, the initial capital contribution of $100,275 by
Nuveen Advisory Corp. (the "Adviser"), a wholly owned subsidiary of The John
Nuveen Company and the recording of the organizational expenses ($15,000) and
their reimbursement by Nuveen Investments, also a wholly owned subsidiary of The
John Nuveen Company.
Each Fund seeks to provide current income exempt from both regular federal and
California state income taxes by investing primarily in a diversified portfolio
of municipal obligations issued by state and local government authorities within
the state of California. The Funds are registered under the Investment Company
Act of 1940 as closed-end management investment companies.
The following is a summary of significant accounting policies followed by the
Funds in the preparation of their financial statements in accordance with
accounting principles generally accepted in the United States.
Securities Valuation
The prices of municipal bonds in each Fund's investment portfolio are provided
by a pricing service approved by the Fund's Board of Directors/Trustees. When
price quotes are not readily available (which is usually the case for municipal
securities), the pricing service establishes fair market value based on yields
or prices of municipal bonds of comparable quality, type of issue, coupon,
maturity and rating, indications of value from securities dealers and general
market conditions. If it is determined that market prices for a security are
unavailable or inappropriate, the Board of Directors/Trustees of the Funds may
establish a fair value for the security. Temporary investments in securities
that have variable rate and demand features qualifying them as short-term
securities are valued at amortized cost, which approximates market value.
Securities Transactions
Securities transactions are recorded on a trade date basis. Realized gains and
losses from such transactions are determined on the specific identification
method. Securities purchased or sold on a when-issued or delayed delivery basis
may have extended settlement periods. The securities so purchased are subject to
market fluctuation during this period. The Funds have instructed the custodian
to segregate assets in a separate account with a current value at least equal to
the amount of the when-issued and delayed delivery purchase commitments. At
August 31, 2001, the Funds had no such outstanding purchase commitments.
Investment Income
Interest income is determined on the basis of interest accrued, adjusted for
amortization of premiums and accretion of discounts on long-term debt
securities.
Income Taxes
Each Fund is a separate taxpayer for federal income tax purposes. Each Fund
intends to comply with the requirements of the Internal Revenue Code applicable
to regulated investment companies and to distribute all of its net investment
income to its shareholders. Therefore, no federal income tax provision is
required. Furthermore, each Fund intends to satisfy conditions which will enable
interest from municipal securities, which is exempt from regular federal and
California state income taxes, to retain such tax-exempt status when distributed
to shareholders of the Funds. All monthly tax-exempt income dividends paid
during the fiscal year ended August 31, 2001, have been designated Exempt
Interest Dividends.
Dividends and Distributions to Shareholders
Tax-exempt net investment income is declared monthly as a dividend and payment
is made or reinvestment is credited to shareholder accounts on the first
business day after month end. Net realized capital gains and/or market discount
from investment transactions are distributed to shareholders not less frequently
than annually. Furthermore, capital gains are distributed only to the extent
they exceed available capital loss carryforwards.
31
Notes to Financial Statements (continued)
Distributions to shareholders of tax-exempt net investment income, net realized
capital gains and/or market discount, if any, are recorded on the ex-dividend
date. The amount and timing of distributions are determined in accordance with
federal income tax regulations, which may differ from accounting principles
generally accepted in the United States. Accordingly, temporary over-
distributions as a result of these differences may occur and will be classified
as either distributions in excess of net investment income, distributions in
excess of net realized gains and/or distributions in excess of net ordinary
taxable income from investment transactions, where applicable.
Preferred Shares
The Funds have issued and outstanding $25,000 stated value Preferred shares.
Each Fund's Preferred shares are issued in one or more Series. The dividend rate
may change every seven days, as set by the Auction Agent. The number of shares
outstanding, by Series and in total, for each Fund is as follows:
INSURED INSURED
CALIFORNIA CALIFORNIA CALIFORNIA CALIFORNIA CALIFORNIA
PREMIUM PREMIUM PREMIUM DIVIDEND DIVIDEND
INCOME INCOME 2 INCOME ADVANTAGE ADVANTAGE 2
(NPC) (NCL) (NCU) (NAC) (NVX)
----------------------------------------------------------------------------------------------------------
Number of shares:
Series M -- -- 1,720 -- 2,200
Series T 1,800 1,900 -- -- --
Series Th -- 1,900 -- 3,500 --
Series F -- -- -- 3,500 2,200
----------------------------------------------------------------------------------------------------------
Total 1,800 3,800 1,720 7,000 4,400
----------------------------------------------------------------------------------------------------------
Effective May 18, 2001, California Dividend Advantage 2 (NVX) issued 2,200
Series M and 2,200 Series F $25,000 stated value Preferred shares.
Insurance
Insured California Premium Income (NPC) and Insured California Premium Income 2
(NCL) invest in municipal securities which are either covered by insurance or
are backed by an escrow or trust account containing sufficient U.S. Government
or U.S. Government agency securities, both of which ensure the timely payment of
principal and interest. Each insured municipal security is covered by Original
Issue Insurance, Secondary Market Insurance or Portfolio Insurance. Such
insurance does not guarantee the market value of the municipal securities or the
value of the Funds' shares. Original Issue Insurance and Secondary Market
Insurance remain in effect as long as the municipal securities covered thereby
remain outstanding and the insurer remains in business, regardless of whether
the Funds ultimately dispose of such municipal securities. Consequently, the
market value of the municipal securities covered by Original Issue Insurance or
Secondary Market Insurance may reflect value attributable to the insurance.
Portfolio Insurance is effective only while the municipal securities are held by
the Funds. Accordingly, neither the prices used in determining the market value
of the underlying municipal securities nor the net asset value of the Funds'
shares include value, if any, attributable to the Portfolio Insurance. Each
policy of the Portfolio Insurance does, however, give the Funds the right to
obtain permanent insurance with respect to the municipal security covered by the
Portfolio Insurance policy at the time of its sale.
Derivative Financial Instruments
The Funds may invest in transactions in certain derivative financial instruments
including futures, forward, swap and option contracts, and other financial
instruments with similar characteristics. Although the Funds are authorized to
invest in such financial instruments, and may do so in the future, they did not
make any such investments during the fiscal year ended August 31, 2001.
Custodian Fee Credit
Each Fund has an arrangement with the custodian bank whereby certain custodian
fees and expenses are reduced by credits earned on each Fund's cash on deposit
with the bank. Such deposit arrangements are an alternative to overnight
investments.
32
Offering Costs
Nuveen Investments has agreed to pay all offering costs (other than the sales
load) that exceed $.03 per Common share for California Dividend Advantage 2
(NVX). California Dividend Advantage 2's (NVX) share of offering costs
($443,400) was recorded as a reduction of the proceeds from the sale of Common
shares.
Costs incurred by California Dividend Advantage 2 (NVX) in connection with its
offering of Preferred shares ($1,296,000) was recorded as a reduction of the
proceeds from the sale of the Preferred shares.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of increases and
decreases in net assets from operations during the reporting period. Actual
results may differ from those estimates.
Audit Guide
In November 2000, the American Institute of Certified Public Accountants (AICPA)
issued a revised version of the AICPA Audit and Accounting Guide for Investment
Companies (the "Guide"). The Guide is effective for annual financial statements
issued for fiscal years beginning after December 15, 2000. It is not anticipated
that the adoption of the Guide will have a significant effect on the financial
statements.
2. FUND SHARES
Transactions in Common and Preferred shares were as follows:
INSURED CALIFORNIA INSURED CALIFORNIA CALIFORNIA
PREMIUM INCOME (NPC) PREMIUM INCOME 2 (NCL) PREMIUM INCOME (NCU)
-------------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
8/31/01 8/31/00 8/31/01 8/31/00 8/31/01 8/31/00
-------------------------------------------------------------------------------------------------------------
Common shares:
Shares sold -- -- -- -- -- --
Shares issued to shareholders
due to reinvestment
of distributions -- 6,092 3,745 13,473 7,867 10,118
-------------------------------------------------------------------------------------------------------------
-- 6,092 3,745 13,473 7,867 10,118
-------------------------------------------------------------------------------------------------------------
Preferred shares sold -- -- -- -- -- --
-------------------------------------------------------------------------------------------------------------
CALIFORNIA DIVIDEND CALIFORNIA DIVIDEND
ADVANTAGE (NAC) ADVANTAGE 2 (NVX)
-------------------------------------------------------------------------------------------------------------
FOR THE PERIOD 3/27/01
YEAR ENDED YEAR ENDED (COMMENCEMENT OF
8/31/01 8/31/00 OPERATIONS) THROUGH 8/31/01
-------------------------------------------------------------------------------------------------------------
Common shares:
Shares sold -- -- 14,780,000
Shares issued to shareholders
due to reinvestment
of distributions 3,990 48,242 16
-------------------------------------------------------------------------------------------------------------
3,990 48,242 14,780,016
-------------------------------------------------------------------------------------------------------------
Preferred shares sold -- -- 4,400
-------------------------------------------------------------------------------------------------------------
3. DISTRIBUTIONS TO COMMON SHAREHOLDERS
The Funds declared Common share dividend distributions from their tax-exempt net
investment income which were paid October 1, 2001, to shareholders of record on
September 15, 2001, as follows:
INSURED INSURED
CALIFORNIA CALIFORNIA CALIFORNIA CALIFORNIA CALIFORNIA
PREMIUM PREMIUM PREMIUM DIVIDEND DIVIDEND
INCOME INCOME 2 INCOME ADVANTAGE ADVANTAGE 2
(NPC) (NCL) (NCU) (NAC) (NVX)
-------------------------------------------------------------------------------------------------------------
Dividend per share $.0705 $.0670 $.0660 $.0705 $.0720
-------------------------------------------------------------------------------------------------------------
33
Notes to Financial Statements (continued)
4. SECURITIES TRANSACTIONS
Purchases and sales (including maturities) of investments in long-term municipal
securities and short-term municipal securities during the fiscal year ended
August 31, 2001, were as follows:
INSURED INSURED
CALIFORNIA CALIFORNIA CALIFORNIA CALIFORNIA CALIFORNIA
PREMIUM PREMIUM PREMIUM DIVIDEND DIVIDEND
INCOME INCOME 2 INCOME ADVANTAGE ADVANTAGE 2
(NPC) (NCL) (NCU) (NAC) (NVX)*
------------------------------------------------------------------------------------------------------------
Purchases:
Long-term municipal securities $29,467,356 $47,896,220 $21,969,914 $89,677,133 $361,682,138
Short-term municipal securities 7,400,000 11,200,000 -- 5,400,000 --
Sales and maturities:
Long-term municipal securities 30,181,547 49,137,925 21,882,476 84,904,781 46,258,094
Short-term municipal securities 7,400,000 11,200,000 -- 5,300,000 --
------------------------------------------------------------------------------------------------------------
* For the period March 27, 2001 (commencement of operations) through August 31,
2001.
At August 31, 2001, the identified cost of investments owned for federal income
tax purposes were as follows:
INSURED INSURED
CALIFORNIA CALIFORNIA CALIFORNIA CALIFORNIA CALIFORNIA
PREMIUM PREMIUM PREMIUM DIVIDEND DIVIDEND
INCOME INCOME 2 INCOME ADVANTAGE ADVANTAGE 2
(NPC) (NCL) (NCU) (NAC) (NVX)
------------------------------------------------------------------------------------------------------------
$129,946,045 $259,252,969 $116,746,883 $493,587,460 $315,537,438
------------------------------------------------------------------------------------------------------------
At August 31, 2001, the following Funds had unused capital loss carryforwards
available for federal income tax purposes to be applied against future capital
gains, if any. If not applied, the carryforwards will expire as follows:
INSURED INSURED
CALIFORNIA CALIFORNIA CALIFORNIA CALIFORNIA
PREMIUM PREMIUM PREMIUM DIVIDEND
INCOME INCOME 2 INCOME ADVANTAGE
(NPC) (NCL) (NCU) (NAC)
-----------------------------------------------------------------------------------------------------------
Expiration year:
2003 $ -- $ 323,810 $1,039,028 $ --
2004 -- 4,345,091 2,742,449 --
2005 165,897 1,283,948 1,049,994 --
2006 -- -- -- --
2007 -- -- -- 1,099,956
2008 681,230 -- -- 1,589,298
2009 1,592,883 2,185,870 -- 4,892,139
-----------------------------------------------------------------------------------------------------------
Total $2,440,010 $8,138,719 $4,831,471 $7,581,393
-----------------------------------------------------------------------------------------------------------
34
5. UNREALIZED APPRECIATION (DEPRECIATION)
Gross unrealized appreciation and gross unrealized depreciation of investments
for federal income tax purposes at August 31, 2001, were as follows:
INSURED INSURED
CALIFORNIA CALIFORNIA CALIFORNIA CALIFORNIA CALIFORNIA
PREMIUM PREMIUM PREMIUM DIVIDEND DIVIDEND
INCOME INCOME 2 INCOME ADVANTAGE ADVANTAGE 2
(NPC) (NCL) (NCU) (NAC) (NVX)
------------------------------------------------------------------------------------------------------------
Gross unrealized:
appreciation $16,329,459 $22,763,148 $6,835,339 $28,929,286 $13,963,695
depreciation (100,796) (829,844) (442,618) (240,340) (604,937)
------------------------------------------------------------------------------------------------------------
Net unrealized appreciation $16,228,663 $21,933,304 $6,392,721 $28,688,946 $13,358,758
------------------------------------------------------------------------------------------------------------
6. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the Funds' (excluding California Dividend Advantage (NAC) and California
Dividend Advantage 2 (NVX)) investment management agreements with the Adviser,
each Fund pays an annual management fee, payable monthly, at the rates set forth
below, which are based upon the average daily net assets of each Fund as
follows:
AVERAGE DAILY NET ASSETS MANAGEMENT FEE
--------------------------------------------------------------------------------
For the first $125 million .6500 of 1%
For the next $125 million .6375 of 1
For the next $250 million .6250 of 1
For the next $500 million .6125 of 1
For the next $1 billion .6000 of 1
For the next $3 billion .5875 of 1
For net assets over $5 billion .5750 of 1
--------------------------------------------------------------------------------
Under California Dividend Advantage's (NAC) and California Dividend Advantage
2's (NVX) investment management agreements with the Adviser, each Fund pays an
annual management fee, payable monthly, at the rates set forth below, which are
based upon the average daily net assets of each Fund as follows:
AVERAGE DAILY NET ASSETS MANAGEMENT FEE
--------------------------------------------------------------------------------
For the first $125 million .6500 of 1%
For the next $125 million .6375 of 1
For the next $250 million .6250 of 1
For the next $500 million .6125 of 1
For the next $1 billion .6000 of 1
For net assets over $2 billion .5750 of 1
--------------------------------------------------------------------------------
The Adviser has agreed to waive part of its management fees or reimburse certain
expenses of California Dividend Advantage (NAC) in an amount equal to .30% of
the average daily net assets for the period May 26, 1999 (commencement of
operations) through July 31, 2004, .25% of the average daily net assets for the
year ended July 31, 2005, .20% of the average daily net assets for the year
ended July 31, 2006, .15% of the average daily net assets for the year ended
July 31, 2007, .10% of the average daily net assets for the year ended July 31,
2008, and .05% of the average daily net assets for the year ended July 31, 2009.
The Adviser has not agreed to reimburse California Dividend Advantage (NAC) for
any portion of its fees and expenses beyond July 31, 2009.
The Adviser has agreed to waive part of its management fees or reimburse certain
expenses of California Dividend Advantage 2 (NVX) in an amount equal to .30% of
the average daily net assets for the period March 27, 2001 (commencement of
operations) through March 31, 2006, .25% of the average daily net assets for the
year ended March 31, 2007, .20% of the average daily net assets for the year
ended March 31, 2008, .15% of the average daily net assets for the year ended
March 31, 2009, .10% of the average daily net assets for the year ended March
31, 2010, and .05% of the average daily net assets for the year ended March 31,
2011. The Adviser has not agreed to reimburse California Dividend Advantage 2
(NVX) for any portion of its fees and expenses beyond March 31, 2011.
The management fee compensates the Adviser for overall investment advisory and
administrative services and general office facilities. The Funds pay no
compensation directly to those of its Directors/Trustees who are affiliated with
the Advisor or to their officers, all of whom receive remuneration for their
services to the Funds from the Advisor.
35
Notes to Financial Statements (continued)
7. COMPOSITION OF NET ASSETS
At August 31, 2001, net assets consisted of:
INSURED INSURED
CALIFORNIA CALIFORNIA CALIFORNIA CALIFORNIA CALIFORNIA
PREMIUM PREMIUM PREMIUM DIVIDEND DIVIDEND
INCOME INCOME 2 INCOME ADVANTAGE ADVANTAGE 2
(NPC) (NCL) (NCU) (NAC) (NVX)
------------------------------------------------------------------------------------------------------------------
Preferred shares, $25,000 stated value per share,
at liquidation value $ 45,000,000 $ 95,000,000 $ 43,000,000 $175,000,000 $110,000,000
Common shares, $.01 par value per share 64,258 126,312 57,715 234,063 147,870
Paid-in surplus 88,889,988 175,167,573 80,143,273 332,416,129 209,936,732
Undistributed (over-distribution of) net
investment income 324,927 544,540 304,995 439,325 (2,962)
Accumulated net realized gain (loss) from
investment transactions (2,540,807) (8,671,401) (4,831,471) (7,581,393) (604,937)
Net unrealized appreciation of investments 16,329,459 22,465,987 6,392,721 28,688,946 13,963,695
------------------------------------------------------------------------------------------------------------------
Net assets $148,067,825 $284,633,011 $125,067,233 $529,197,070 $333,440,398
------------------------------------------------------------------------------------------------------------------
Authorized shares:
Common 200,000,000 200,000,000 Unlimited Unlimited Unlimited
Preferred 1,000,000 1,000,000 Unlimited Unlimited Unlimited
------------------------------------------------------------------------------------------------------------------
36
Financial Highlights
37
Financial Highlights
Selected data for a Common share outstanding throughout each period:
Investment Operations Less Distributions
------------------------------ --------------------------------------------------------
From and From and
in Excess in Excess
of Net of Net
Net Investment Investment Capital Capital
Realized/ Income to Income to Gains to Gains to
Beginning Net Unrealized Common Preferred Common Preferred
Net Asset Investment Investment Share- Share- Share- Share-
Value Income Gain (Loss) Total holders holders+ holders holders+ Total
------------------------------------------------------------------------------------------------------------------------------------
Insured California
Premium Income (NPC)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 8/31:
2001 $15.08 $1.04 $ .99 $2.03 $(.86) $(.21) $-- $-- $(1.07)
2000 14.81 1.09 .30 1.39 (.88) (.24) -- -- (1.12)
1999 16.31 1.09 (1.56) (.47) (.83) (.20) -- -- (1.03)
1998 15.39 1.03 .92 1.95 (.81) (.22) -- -- (1.03)
1997 14.46 1.04 .93 1.97 (.81) (.23) -- -- (1.04)
Insured California
Premium Income 2 (NCL)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 8/31:
2001 14.09 1.01 .91 1.92 (.78) (.22) -- -- (1.00)
2000 13.70 1.02 .41 1.43 (.80) (.24) -- -- (1.04)
1999 14.82 1.01 (1.14) (.13) (.78) (.21) -- -- (.99)
1998 14.06 .98 .77 1.75 (.75) (.24) -- -- (.99)
1997 13.27 .99 .77 1.76 (.74) (.23) -- -- (.97)
California Premium Income (NCU)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 8/31:
2001 13.34 1.00 .90 1.90 (.79) (.23) -- -- (1.02)
2000 13.19 1.03 .14 1.17 (.79) (.23) -- -- (1.02)
1999 14.30 1.00 (1.13) (.13) (.77) (.21) -- -- (.98)
1998 13.60 .98 .70 1.68 (.74) (.24) -- -- (.98)
1997 12.70 .99 .89 1.88 (.74) (.24) -- -- (.98)
California Dividend Advantage (NAC)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 8/31:
2001 13.82 1.07 1.28 2.35 (.81) (.23) -- -- (1.04)
2000 13.33 1.07 .52 1.59 (.84) (.26) -- -- (1.10)
1999(a) 14.33 .20 (.92) (.72) (.14) (.03) -- -- (.17)
California Dividend Advantage 2 (NVX)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 8/31:
2001(b) 14.33 .34 .90 1.24 (.29) (.05) -- -- (.34)
------------------------------------------------------------------------------------------------------------------------------------
Total Returns
-------------------
Offering
Costs and Based
Preferred Ending Based on
Share Net Ending on Net
Underwriting Asset Market Market Asset
Discounts Value Value Value** Value**
------------------------------------------------------------------------------------------
Insured California
Premium Income (NPC)
------------------------------------------------------------------------------------------
Year Ended 8/31:
2001 $-- $16.04 $15.6900 14.12% 12.43%
2000 -- 15.08 14.5625 .84 8.34
1999 -- 14.81 15.3750 1.62 (4.35)
1998 -- 16.31 15.9375 15.85 11.51
1997 -- 15.39 14.5000 10.69 12.30
Insured California
Premium Income 2 (NCL)
------------------------------------------------------------------------------------------
Year Ended 8/31:
2001 -- 15.01 14.8300 11.99 12.45
2000 -- 14.09 14.0000 3.58 9.21
1999 -- 13.70 14.3750 2.27 (2.50)
1998 -- 14.82 14.8125 15.70 10.95
1997 -- 14.06 13.5000 14.36 11.82
California Premium Income (NCU)
------------------------------------------------------------------------------------------
Year Ended 8/31:
2001 -- 14.22 14.1700 12.84 12.92
2000 -- 13.34 13.3125 5.93 7.63
1999 -- 13.19 13.3750 .81 (2.57)
1998 -- 14.30 14.0000 12.54 10.83
1997 -- 13.60 13.1250 17.16 13.20
California Dividend Advantage (NAC)
------------------------------------------------------------------------------------------
Year Ended 8/31:
2001 -- 15.13 14.8900 15.06 15.85
2000 -- 13.82 13.7500 (2.18) 10.80
1999(a) (.11) 13.33 15.0000 .96 (5.99)
California Dividend Advantage 2 (NVX)
------------------------------------------------------------------------------------------
Year Ended 8/31:
2001(b) (.12) 15.11 15.2100 3.40 7.55
------------------------------------------------------------------------------------------
38
Ratios/Supplemental Data
----------------------------------------------------------------------------
Before Credit/Reimbursement
--------------------------------------------------------
Ratio of Net Ratio of Net
Ratio of Investment Ratio of Investment
Expenses Income to Expenses Income to
to Average Average to Average Average
Ending Net Assets Net Assets Total Total
Net Applicable Applicable Net Assets Net Assets
Assets to Common to Common Including Including
(000) Shares++ Shares++ Preferred++ Preferred++
------------------------------------------------------------------------------------------------
Insured California
Premium Income (NPC)
------------------------------------------------------------------------------------------------
Year Ended 8/31:
2001 $148,068 1.22% 6.77% .84% 4.65%
2000 141,903 1.25 7.65 .84 5.13
1999 140,091 1.22 6.81 .85 4.74
1998 149,478 1.22 6.49 .85 4.50
1997 143,571 1.25 6.96 .85 4.74
Insured California
Premium Income 2 (NCL)
------------------------------------------------------------------------------------------------
Year Ended 8/31:
2001 284,633 1.24 7.01 .82 4.60
2000 272,977 1.28 7.65 .81 4.88
1999 267,833 1.24 6.86 .82 4.53
1998 281,399 1.25 6.79 .82 4.46
1997 271,883 1.28 7.24 .83 4.67
California Premium Income (NCU)
------------------------------------------------------------------------------------------------
Year Ended 8/31:
2001 125,067 1.32 7.36 .85 4.75
2000 119,878 1.38 8.09 .87 5.10
1999 118,877 1.30 7.08 .85 4.62
1998 125,066 1.32 7.02 .86 4.57
1997 120,995 1.34 7.47 .86 4.76
California Dividend Advantage (NAC)
------------------------------------------------------------------------------------------------
Year Ended 8/31:
2001 529,197 1.19 7.03 .78 4.61
2000 498,326 1.24 7.93 .78 4.99
1999(a) 486,367 .93* 5.06* .73* 3.99*
California Dividend Advantage 2 (NVX)
------------------------------------------------------------------------------------------------
Year Ended 8/31:
2001(b) 333,440 1.05* 5.23* .77* 3.85*
------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
--------------------------------------------------------------- Municipal Auction Rate Cumulative
After Credit/Reimbursement*** Preferred Stock at End of Period
---------------------------------------------------- ---------------------------------------
Ratio of Net Ratio of Net
Ratio of Investment Ratio of Investment
Expenses Income to Expenses Income to
o Average Average to Average Average
Net Assets Net Assets Total Total Aggregate Liquidation
Applicable Applicable Net Assets Net Assets Portfolio Amount and Market Asset
o Common to Common Including Including Turnover Outstanding Value Coverage
Shares++ Shares++ Preferred++ Preferred++ Rate (000) Per Share Per Share
------------------------------------------------------------------------------------------------------------------------------------
Insured California
Premium Income (NPC)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 8/31:
2001 1.21% 6.79% .83% 4.66% 21% $ 45,000 $ 25,000 $ 82,260
2000 1.24 7.66 .83 5.13 27 45,000 25,000 78,835
1999 1.22 6.82 .85 4.74 50 45,000 25,000 77,828
1998 1.22 6.49 .85 4.50 2 45,000 25,000 83,043
1997 1.25 6.96 .85 4.74 9 45,000 25,000 79,762
Insured California
Premium Income 2 (NCL)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 8/31:
2001 1.24 7.02 .81 4.61 18 95,000 25,000 74,903
2000 1.26 7.66 .81 4.89 26 95,000 25,000 71,836
1999 1.24 6.86 .82 4.53 35 95,000 25,000 70,482
1998 1.25 6.79 .82 4.46 13 95,000 25,000 74,052
1997 1.28 7.24 .83 4.67 24 95,000 25,000 71,548
California Premium Income (NCU)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 8/31:
2001 1.30 7.38 .84 4.76 18 43,000 25,000 72,714
2000 1.36 8.10 .86 5.10 19 43,000 25,000 69,696
1999 1.30 7.08 .85 4.63 36 43,000 25,000 69,115
1998 1.32 7.02 .86 4.57 21 43,000 25,000 72,713
1997 1.34 7.47 .86 4.76 44 43,000 25,000 70,346
California Dividend Advantage (NAC)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 8/31:
2001 .72 7.50 .47 4.92 17 175,000 25,000 75,600
2000 .75 8.43 .47 5.30 25 175,000 25,000 71,189
1999(a) .55* 5.45* .43* 4.29* 8 175,000 25,000 69,481
California Dividend Advantage 2 (NVX)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 8/31:
2001(b) .62* 5.65* .46* 4.16* 40 110,000 25,000 75,782
------------------------------------------------------------------------------------------------------------------------------------
* Annualized.
** Total Investment Return on Market Value is the combination of reinvested
dividend income, reinvested capital gains distributions, if any, and
changes in stock price per share. Total Return on Net Asset Value is the
combination of reinvested dividend income, reinvested capital gains
distributions, if any, and changes in net asset value per share. Total
returns are not annualized.
*** After custodian fee credit and expense reimbursement, where applicable.
+ The amounts shown are based on Common share equivalents.
++ Ratios do not reflect the effect of dividend payments to Preferred
shareholders; income ratios reflect income earned on assets attributable to
Preferred shares.
(a) For the period May 26, 1999 (commencement of operations) through August 31,
1999.
(b) For the period March 27, 2001 (commencement of operations) through August
31, 2001.
See accompanying notes to financial statements.
39
Build Your Wealth Automatically
Sidebar text: Nuveen makes reinvesting easy. A phone call is all it takes to set
up your reinvestment account.
NUVEEN EXCHANGE-TRADED FUNDS DIVIDEND REINVESTMENT PLAN
Your Nuveen Exchange-Traded Fund allows you to conveniently reinvest dividends
and/or capital gains distributions in additional fund shares.
By choosing to reinvest, you'll be able to invest money regularly and
automatically, and watch your investment grow through the power of tax-free
compounding. Just like dividends or distributions in cash, there may be times
when income or capital gains taxes may be payable on dividends or distributions
that are reinvested.
It is important to note that an automatic reinvestment plan does not ensure a
profit, nor does it protect you against loss in a declining market.
EASY AND CONVENIENT
To make recordkeeping easy and convenient, each month you'll receive a statement
showing your total dividends and distributions, the date of investment, the
shares acquired and the price per share, and the total number of shares you own.
HOW SHARES ARE PURCHASED
The shares you acquire by reinvesting will either be purchased on the open
market or newly issued by the Fund. If the shares are trading at or above net
asset value at the time of valuation, the Fund will issue new shares at the
then-current market price. If the shares are trading at less than net asset
value, shares for your account will be purchased on the open market. Dividends
and distributions received to purchase shares in the open market will normally
be invested shortly after the dividend payment date. No interest will be paid on
dividends and distributions awaiting reinvestment. Because the market price of
shares may increase before purchases are completed, the average purchase price
per share may exceed the market price at the time of valuation, resulting in the
acquisition of fewer shares than if the dividend or distribution had been paid
in shares issued by the Fund. A pro rata portion of any applicable brokerage
commissions on open market purchases will be paid by Plan participants. These
commissions usually will be lower than those charged on individual transactions.
FLEXIBILITY
You may change your distribution option or withdraw from the Plan at any time,
should your needs or situation change. Should you withdraw, you can receive a
certificate for all whole shares credited to your reinvestment account and cash
payment for fractional shares, or cash payment for all reinvestment account
shares, less brokerage commissions and a $2.50 service fee.
You can reinvest whether your shares are registered in your name, or in the name
of a brokerage firm, bank, or other nominee. Ask your investment advisor if his
or her firm will participate on your behalf. Participants whose shares are
registered in the name of one firm may not be able to transfer the shares to
another firm and continue to participate in the Plan.
The Fund reserves the right to amend or terminate the Plan at any time. Although
the Fund reserves the right to amend the Plan to include a service charge
payable by the participants, there is no direct service charge to participants
in the Plan at this time.
For more information on the Nuveen Automatic Reinvestment Plan or to enroll in
or withdraw from the Plan, speak with your financial advisor or call us at (800)
257-8787.
40
Fund Information
BOARD OF DIRECTORS/TRUSTEES
Robert P. Bremner
Lawrence H. Brown
Anne E. Impellizzeri
Peter R. Sawers
William J. Schneider
Timothy R. Schwertfeger
Judith M. Stockdale
FUND MANAGER
Nuveen Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
CUSTODIAN, TRANSFER AGENT
AND SHAREHOLDER SERVICES
The Chase Manhattan Bank
4 New York Plaza
New York, NY 10004-2413
(800) 257-8787
LEGAL COUNSEL
Morgan, Lewis &
Bockius LLP
Washington, D.C.
INDEPENDENT AUDITORS
Ernst & Young LLP
Chicago, IL
Each Fund intends to repurchase shares of its own common or preferred stock in
the future at such times and in such amounts as is deemed advisable. No shares
were repurchased during the twelve-month period ended August 31, 2001. Any
future repurchases will be reported to shareholders in the next annual or
semiannual report.
41
Serving Investors for Generations
Photo of: John Nuveen, Sr.
For over a century, generations of Americans have relied on Nuveen Investments
to help them grow and keep the money they've earned. Financial advisors,
investors and their families have associated Nuveen Investments with quality,
expertise and dependability since 1898. That is why financial advisors have
entrusted the assets of more than 1.3 million investors to Nuveen.
With the know-how that comes from a century of experience, Nuveen continues to
build upon its reputation for quality. Now, financial advisors and investors can
count on Nuveen Investments to help them design customized solutions that meet
the far-reaching financial goals unique to family wealth strategies - solutions
that can translate into legacies.
To find out more about how Nuveen Investments' products and services can help
you preserve your financial security, talk with your financial advisor, or call
us at (800) 257-8787 for more information, including a prospectus where
applicable. Please read that information carefully before you invest.
Invest well.
Look ahead.
LEAVE YOUR MARK.(SM)
LOGO: NUVEEN Investments
Nuveen Investments o 333 West Wacker Drive
Chicago, IL 60606 o www.nuveen.com FAN-2-8-01