Annual Report August 31, 2002
Nuveen
Municipal Closed-End
Exchange-Traded
Funds
CALIFORNIA
NPC
NCL
NCU
NAC
NVX
NZH
NKL
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Photo of: Timothy R. Schwertfeger
Chairman of the Board
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Dear
Shareholder
I am pleased to report that during the period covered by this report, your Fund
continued to meet its objective of providing attractive tax-free monthly income,
while at the same time offering opportunities to reduce overall portfolio
volatility. Detailed information on your Fund's performance can be found in the
Portfolio Managers' Comments and Performance Overview sections of this report. I
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In uncertain markets like these, prudent investors understand the importance of
diversification, balance and risk management - all attributes your Nuveen Fund
can bring to your portfolio. In addition to providing you with 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 call structure, better adapt to current market conditions or increase
diversification.
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.
Our mission continues to be to assist you and your financial advisor by offering
the investment services and products that can help you meet your financial
objectives. We thank you for continuing to choose Nuveen Investments as a
partner as you work toward that goal.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
October 15, 2002
1
Nuveen California Municipal Closed-End Exchange-Traded Funds
(NPC, NCL, NCU, NAC, NVX, NZH, NKL)
Portfolio Managers'
Comments
Portfolio managers Steve Krupa and Bill Fitzgerald discuss economic conditions,
key investment strategies, and the recent performance of the Nuveen California
Funds. Steve, who joined Nuveen in 1979, has managed NPC and NCL since 2001.
With 14 years of investment management experience at Nuveen, Bill assumed
portfolio management responsibility for NCU in 1998, NAC in 1999, NVX and NZH
upon their inceptions in 2001, and NKL upon its inception in March 2002.
WHAT WERE THE MAJOR DRIVERS OF THE U.S. ECONOMY AND THE MUNICIPAL MARKET DURING
THIS REPORTING PERIOD?
The two major forces at work during the twelve months ended August 31, 2002,
were continued weakness in the U.S. economy and the Federal Reserve's efforts to
address this situation by lowering short-term interest rates and maintaining
them at 40-year lows. The events of September 11, 2001, and the uncertain
geopolitical climate that followed also have impacted the economy and the
markets.
In the municipal market, the general economic environment of the past twelve
months, including a sluggish recovery and lack of inflationary pressures, helped
many bonds perform well. The first eight months of 2002 saw a continuation of
the trend toward increased municipal issuance at the national level, with $219.6
billion in new supply, up 21% over January-August 2001. 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 investors, especially traditional purchasers such as
property/ casualty insurance companies, have also been active buyers in the
municipal market.
HOW WAS THE ECONOMIC AND MUNICIPAL ENVIRONMENT IN CALIFORNIA?
California's economy paralleled the national condition, and was characterized by
a general slowdown, tepid recovery, and little job growth. As of August 2002,
the state unemployment rate was 6.2%, up from 5.5% a year earlier and higher
than the national average of 5.7%. In general, southern California has
outperformed the northern part of the state over the past year, which continues
to be hampered by the downturn in the technology industry.
Shortly after the closing date for this report, California approved its state
budget for fiscal year 2003, which began July 1, 2002. The two-month delay in
passage was caused by legislators' inability to reach agreement on ways to
eliminate a $24 billion deficit, a product of last year's recession, this year's
weak recovery and the poor performance of the equity markets. Through most of
the 1990s, California's tech-heavy economy produced high levels of income tax
revenue from the exercise of stock options, as well as capital gains taxes from
the sale of appreciated investments. From a budgetary perspective, the state has
had a difficult time adjusting to the changed equity market environment, as
personal income tax revenue declined 24% during fiscal year 2002.
The budget for fiscal year 2003 was balanced through a combination of expense
reductions, new debt issuance, and fund transfers. However, some concerns remain
that the state's new budget could hurt local governments by cutting tax
reimbursements to cities, counties and school districts. The current budget also
left unresolved California's structural budget deficit, i.e., the state
continues to spend significantly more than it is earning through recurring
revenues. As a result, California faces an estimated $10 billion shortfall in
fiscal year 2004. The state's ability to find new revenue sources will be an
important factor in demonstrating to the market that California can make the
necessary changes to close its structural budget imbalance.
2
During the first eight months of 2002, California issued $25.4 billion in new
bonds, up more than 11% over the same period in 2001. Given the state's
continued need to fund operating deficits, issuance is expected to remain heavy.
Chief among the scheduled offerings is $11.8 billion in power bonds issued by
the Department of Water Resources. This issue, which represents the largest bond
offering in municipal history, would reimburse California's general fund for the
$6.6 billion the state spent to purchase power for investor-owned utilities
during the 2001 power crisis. Also on the calendar is $4.5 billion in revenue
bonds secured by the state's share of the proceeds from the master settlement
agreement with the major tobacco companies. Following a Moody's downgrade in
November 2001, credit ratings for state-issued general obligation debt have
remained intact at A1/A+/AA. As of August 2002, Moody's, Standard & Poor's and
Fitch all maintained a negative outlook for the state due to concerns about
budget issues and near-term liquidity.
HOW DID THESE NUVEEN CALIFORNIA FUNDS PERFORM OVER THE PAST TWELVE MONTHS?
During the twelve months ended August 31, 2002, the Fed's policy of maintaining
short-term interest rates at relatively low levels, combined with generally
favorable market conditions, created a positive total return environment for
municipal bonds and bond funds. Individual results for the Nuveen California
Funds, as well as for relevant indexes, are presented in the accompanying table.
TOTAL RETURN LEHMAN LIPPER
MARKET YIELD ON NAV TOTAL RETURN1 AVERAGE2
---------------------------------------------------------------------------
1 YEAR 1 YEAR 1 YEAR
TAXABLE- ENDED ENDED ENDED
8/31/02 EQUIVALENT3 8/31/02 8/31/02 8/31/02
---------------------------------------------------------------------------
NPC 5.49% 8.65% 6.47% 5.62% 5.32%
---------------------------------------------------------------------------
NCL 5.80% 9.13% 6.29% 5.62% 5.32%
---------------------------------------------------------------------------
NCU 6.04% 9.51% 7.48% 5.61% 5.51%
---------------------------------------------------------------------------
NAC 6.06% 9.54% 6.75% 5.61% 5.51%
---------------------------------------------------------------------------
NVX 6.13% 9.65% 3.90% 5.61% 5.51%
---------------------------------------------------------------------------
NZH 6.17% 9.72% NA - -
---------------------------------------------------------------------------
NKL 6.08% 9.57% NA - -
---------------------------------------------------------------------------
Past performance is not predictive of future results.
For additional information, see the individual Performance Overview for your
Fund in this report.
In a market characterized by rising bond values, funds with longer durations4
typically would be expected to outperform funds and indexes with shorter
durations. As of August 31, 2002, the durations of the seven Nuveen California
Funds in this report ranged from 7.25 to 12.55, with six of the seven showing
durations greater than the 8.49 average duration of the unleveraged Lehman
Brothers California Tax-Exempt Bond Index.
In addition to duration, the relative performance of these Funds also was
influenced by factors such as credit quality, portfolio trading activity, call
exposure, and price movement of individual holdings. NVX's underperformance, for
example, was due in part to this portfolio's holding of airline-backed Los
Angeles International Airport bonds, which accounted for about 1.6% of the
Fund's net assets at the beginning of this fiscal year. The value of these bonds
fell about 75% over the twelve months ended August 31, 2002, in part because of
the decline in air travel over the past year.
On the other hand, NCU benefited as interest rates declined during the second
half of the Fund's fiscal year. As bond prices rose in response to the declining
rates, several of this Fund's holdings were priced to their call dates rather
than their maturity dates. As a result, these bonds were priced to a
significantly shorter portion of the yield curve, causing their prices to
increase even more. One example was the Fund's holding of Riverside County
Redevelopment Agency securities for the Jurupa Valley Project Area. The prices
of these bonds increased to 104.05 from 101.79 during the reporting period,
helping the Fund show strong total return performance for the year ended August
31, 2002.
HOW DID THE MARKET ENVIRONMENT AFFECT THE FUNDS' DIVIDENDS AND SHARE PRICES?
As the Fed continued to keep short-term interest rates relatively low, the
dividend-paying capabilities of these Funds benefited from their use of
leverage, a strategy that can potentially enhance the dividends
1 The total annual returns on common share net asset value for NPC and NCL
are compared with the total annual return of the Lehman Brothers California
Insured Tax-Exempt Bond Index, an unleveraged index comprising a broad
range of insured California municipal bonds, while the annual returns of
the non-insured Funds are compared with the annual return 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 9 funds in the Lipper California Insured Municipal Debt Funds
category, while the total returns of the non-insured Funds are compared
with the return of the 21 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 36.5%.
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.
3
paid to common shareholders. This is due to the fact that the extent of this
benefit is tied in part to the short-term rates the Funds pay their
MuniPreferred(R) shareholders. Low short-term rates, such as those currently in
effect, can enable the Funds to reduce the amount of income they pay preferred
shareholders, which can leave more earnings to support common share dividends.
During the fiscal year ended August 31, 2002, steady or falling short-term
interest rates enabled us to implement three dividend increases in NCL and NCU,
two in NPC and NAC, and one in NVX. Among the newer Funds, NZH maintained
stable, attractive dividends during this period, while NKL, which was introduced
in March 2002, declared its first monthly dividend in May.
Given the volatility of the equity markets over past year, investors seem to
have continued to evaluate their asset allocation plans. We believe many made
slow, but significant, shifts to bonds and bond funds to take better advantage
of the balance offered by fixed-income investments. Over this period, the share
prices of the Nuveen Funds covered in this report remained relatively stable or
exhibited modest declines. As of August 31, 2002, all of these Funds were
trading at modest discounts to their common share net asset values (see charts
on individual Performance Overview pages).
WHAT KEY STRATEGIES WERE USED TO MANAGE THE NUVEEN CALIFORNIA FUNDS DURING THE
FISCAL YEAR ENDED AUGUST 31, 2002?
Looking first at the insured Funds, we believed NPC and NCL were well positioned
structurally to take advantage of the interest rate environment of the past
twelve months. Our strategic focus continued to be on increasing call protection
and finding undervalued bonds. Specifically, we purchased tax-backed bonds
issued to finance infrastructure improvements in various areas of the state and
to support future growth and development of communities in all regions.
In the non-insured Funds, our focus was on shifting the maturity structure of
these Funds from long to long/intermediate by selling bonds in the 20- to
25-year part of the yield curve and replacing them with bonds in the 15- to
20-year range. Essentially, our strategy involved positioning the portfolios
more defensively in anticipation of potential changes in the interest rate
environment. We believed that bonds in the 15- to 20-year part of the yield
curve offered greater opportunities for price appreciation and would perform
well if and when interest rates rose. Our recent purchases were primarily AAA
insured bonds offering higher coupons, as we believe these issues will provide
better downside protection in the event of a decline in bond prices. We also
made some strategic investments in non-rated assessment district bonds with
maturities of 20 years, primarily housing project issues, to provide enhanced
yield and diversification. Overall, we believed the Funds were adequately
weighted in the healthcare and multifamily housing sectors, which helped Fund
performance over the past twelve months. During this time, we made no new
investments in the transportation sector, while avoiding general obligation
bonds due to budget uncertainties.
As a result of the yield curve positioning of the non-insured Funds, as well as
market moves affecting both types of Funds, the durations of the Nuveen
California Funds generally shortened over the past six months. We believed this
would help make our portfolios less sensitive to interest rate changes while
still providing yields and returns that were competitive with longer duration
funds.
In the current market environment, we believed that maintaining strong credit
quality remains a key requirement for all of the Funds. As of August 31, 2002,
each of the non-insured Funds continued to offer excellent credit quality, with
allocations of bonds rated AAA/U.S. guaranteed and AA ranging
4
from 60% to 84%. All of these non-insured Funds also had a portion of their
assets invested in BBB and non-rated bonds, which can serve to enhance the
Funds' income streams. The insured Funds are 100% invested in insured and/or
U.S. guaranteed securities, which means that credit quality is not an issue.
In March 2002, we introduced the Nuveen Insured California Dividend Advantage
Municipal Fund (NKL). This Fund is now fully invested and, in our opinion,
performing well for shareholders. As mentioned earlier, NKL declared its first
dividend on schedule in May 2002, and we believe the Fund's holdings place it in
an excellent position to pay attractive, dependable dividends on a monthly basis
going forward. In assembling NKL, the majority of our purchases were 30-year
bonds, with a focus on income. In keeping with our outlook, we are now working
to reposition this Fund more defensively by systematically selling longer bonds
and buying those in the 15- to 20-year range.
WHAT IS YOUR OUTLOOK FOR THE MUNICIPAL MARKET IN GENERAL AND THE NUVEEN
CALIFORNIA FUNDS IN PARTICULAR?
In general, our outlook for the fixed-income markets over the next twelve months
remains positive. We believe the U.S. economy is headed for an eventual
recovery, but one that could be slower to arrive and offer a slower rate of
growth than some are currently predicting. We also expect inflation and interest
rates to remain relatively low over the near term, while new municipal volume
should continue to be strong. Currently, national issuance is on pace to exceed
the record of $292 billion set in 1993. Demand for tax-exempt municipal bonds
should remain solid, as investors look for ways to rebalance their portfolios
and reduce risk. One item that will bear watching, however, is any increase in
budgetary pressure at the city and county levels that could potentially result
in credit rating downgrades, among bonds issued by these entities.
Most of these Funds continue to offer excellent levels of call protection
through 2002 and 2003, with call exposure ranging from 0% in NKL to 19% in NPC.
NPC, which reaches its 10-year anniversary in November 2002, faces a slightly
higher level of potential calls during this period, as the Fund works its way
through the phase of its life cycle often associated with increased call
exposure. In this Fund, as well as in NCL and NCU, which are approaching their
10-year anniversaries in 2003, we have been proactive in selling callable bonds
and reinvesting the proceeds further out on the yield curve to enhance total
return potential and support the Funds' dividends. The number of actual calls
experienced by these Funds will depend largely on market interest rates over
this time. In general, we believe the call exposure of these Funds is very
manageable, and we foresee no problems in working through it.
In coming months, we plan to remain focused on strategies that add value for our
shareholders, provide support for the Funds' dividends, and fully utilize
Nuveen's experience and research expertise. Specific areas of concentration will
include enhancing portfolio call protection, managing interest rate volatility
through the purchase of bonds in the 15- to 20-year part of the yield curve, and
taking advantage of additional opportunities to position our portfolios more
defensively. The heavy issuance anticipated in the California market should
enhance our ability to find such opportunities. In addition, as energy markets
in California continue to stabilize, we expect there to be no significant impact
on the portfolios' holdings as a result of the 2001 power crisis. Overall, we
believe the Nuveen California Funds are well positioned for the market
environment ahead. In our opinion, they continue to represent an important
element of investors' long-range financial programs, providing dependable
tax-free income, diversification, and balance in uncertain times.
5
Nuveen Insured California Premium Income Municipal Fund, Inc.
Performance
Overview As of August 31, 2002
NPC
Pie Chart:
CREDIT QUALITY
Insured 82%
U.S. Guaranteed 18%
PORTFOLIO STATISTICS
--------------------------------------------------
Share Price $15.85
--------------------------------------------------
Common Share Net Asset Value $16.17
--------------------------------------------------
Market Yield 5.49%
--------------------------------------------------
Taxable-Equivalent Yield
(Federal Income Tax Rate)1 7.84%
--------------------------------------------------
Taxable-Equivalent Yield
(Federal and State Income Tax Rate)1 8.65%
--------------------------------------------------
Net Assets Applicable to
Common Shares ($000) $104,137
--------------------------------------------------
Average Effective Maturity (Years) 20.46
--------------------------------------------------
Leverage-Adjusted Duration 9.05
--------------------------------------------------
ANNUALIZED TOTAL RETURN (Inception 11/92)
--------------------------------------------------
ON SHARE PRICE ON NAV
--------------------------------------------------
1-Year 6.73% 6.47%
--------------------------------------------------
5-Year 7.65% 6.70%
--------------------------------------------------
Since Inception 6.42% 7.15%
--------------------------------------------------
TOP FIVE SECTORS (as a % of total investments)
--------------------------------------------------
Tax Obligation/General 25%
--------------------------------------------------
U.S. Guaranteed 18%
--------------------------------------------------
Tax Obligation/Limited 15%
--------------------------------------------------
Water and Sewer 14%
--------------------------------------------------
Education and Civic Organizations 7%
--------------------------------------------------
Bar chart:
2001-2002 Monthly Tax-Free Dividends Per Share
9/1/01 0.0705
10/01 0.0705
11/01 0.0705
12/01 0.0715
1/02 0.0715
2/02 0.0715
3/02 0.0725
4/02 0.0725
5/02 0.0725
6/02 0.0725
7/02 0.0725
8/31/02 0.0725
Line chart:
Share Price Performance
Weekly Closing Price
Past performance is not predictive of future results.
9/1/01 15.42
15.57
15
15.25
15.45
15.2
15.2
15.6
15.87
15.9
15.91
15.71
15.95
15.9
15.5
15.79
15.5
15.5
15.7
15.69
15.85
15.9
16
15.84
15.95
15.9
15.75
15.25
14.84
14.78
14.83
14.95
15.1
15.23
15.35
15.5
15.49
15.44
15.51
15.77
15.5
15.54
15.6
16.05
16.09
15.95
15.75
16.05
16.05
16
16.2
8/31/02 15.85
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%. 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 36.5%.
6
Nuveen Insured California Premium Income Municipal Fund 2, Inc.
Performance
Overview As of August 31, 2002
NCL
Pie Chart:
CREDIT QUALITY
Insured 88%
Insured and U.S. Guaranteed 9%
U.S. Guaranteed 3%
PORTFOLIO STATISTICS
--------------------------------------------------
Share Price $14.80
--------------------------------------------------
Common Share Net Asset Value $15.08
--------------------------------------------------
Market Yield 5.80%
--------------------------------------------------
Taxable-Equivalent Yield
(Federal Income Tax Rate)1 8.29%
--------------------------------------------------
Taxable-Equivalent Yield
(Federal and State Income Tax Rate)1 9.13%
--------------------------------------------------
Net Assets Applicable to
Common Shares ($000) $190,870
--------------------------------------------------
Average Effective Maturity (Years) 17.39
--------------------------------------------------
Leverage-Adjusted Duration 7.25
--------------------------------------------------
ANNUALIZED TOTAL RETURN (Inception 3/93)
--------------------------------------------------
ON SHARE PRICE ON NAV
--------------------------------------------------
1-Year 5.57% 6.29%
--------------------------------------------------
5-Year 7.70% 7.14%
--------------------------------------------------
Since Inception 5.71% 6.46%
--------------------------------------------------
TOP FIVE SECTORS (as a % of total investments)
--------------------------------------------------
Tax Obligation/Limited 36%
--------------------------------------------------
U.S. Guaranteed 12%
--------------------------------------------------
Tax Obligation/General 11%
--------------------------------------------------
Utilities 9%
--------------------------------------------------
Water and Sewer 8%
--------------------------------------------------
Bar Chart:
2001-2002 Monthly Tax-Free Dividends Per Share
9/01 0.067
10/01 0.067
11/01 0.067
12/01 0.0685
1/02 0.0685
2/02 0.0685
3/02 0.07
4/02 0.07
5/02 0.07
6/02 0.0715
7/02 0.0715
8/02 0.0715
Line Chart:
Share Price Performance
Weekly Closing Price
Past performance is not predictive of future results.
9/1/01 14.83
14.84
14.2
14.47
15
14.73
14.94
14.88
15.24
15.47
15.16
14.92
14.84
14.7
14.66
14.36
14.62
14.51
14.45
14.77
14.7
14.71
14.87
14.71
14.87
14.85
14.85
14.21
14.05
13.9
14.09
14.08
14.25
14.45
14.7
14.6
14.7
14.66
14.7
14.85
14.74
14.75
14.93
15.23
15.37
15.47
15.23
15.3
15.32
15.16
14.98
8/31/02 14.8
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%. 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 36.5%.
7
Nuveen California Premium Income Municipal Fund
Performance
Overview As of August 31, 2002
NCU
Pie Chart:
CREDITQUALITY
AAA/U.S. Guaranteed 65%
AA 9%
A 4%
BBB 11%
NR 8%
Other 3%
PORTFOLIO STATISTICS
--------------------------------------------------
Share Price $14.00
--------------------------------------------------
Common Share Net Asset Value $14.42
--------------------------------------------------
Market Yield 6.04%
--------------------------------------------------
Taxable-Equivalent Yield
(Federal Income Tax Rate)1 8.63%
--------------------------------------------------
Taxable-Equivalent Yield
(Federal and State Income Tax Rate)1 9.51%
--------------------------------------------------
Net Assets Applicable to
Common Shares ($000) $83,249
--------------------------------------------------
Average Effective Maturity (Years) 17.27
--------------------------------------------------
Leverage-Adjusted Duration 10.89
--------------------------------------------------
ANNUALIZED TOTAL RETURN (Inception 6/93)
--------------------------------------------------
ON SHARE PRICE ON NAV
--------------------------------------------------
1-Year 4.84% 7.48%
--------------------------------------------------
5-Year 7.29% 7.12%
--------------------------------------------------
Since Inception 5.29% 6.21%
--------------------------------------------------
TOP FIVE SECTORS (as a % of total investments)
--------------------------------------------------
Tax Obligation/Limited 33%
--------------------------------------------------
Healthcare 12%
--------------------------------------------------
Housing/Multifamily 11%
--------------------------------------------------
U.S. Guaranteed 9%
--------------------------------------------------
Tax Obligation/General 8%
--------------------------------------------------
Bar Chart:
2001-2002 Monthly Tax-Free Dividends Per Share
9/01 0.066
10/01 0.066
11/01 0.066
12/01 0.0675
1/02 0.0675
2/02 0.0675
3/02 0.069
4/02 0.069
5/02 0.069
6/02 0.0705
7/02 0.0705
8/02 0.0705
Line Chart:
Share Price Performance
Weekly Closing Price
Past performance is not predictive of future results.
9/1/01 13.81
13.77
13.44
13.53
13.87
14.04
14.03
13.86
14.05
14.39
14.14
14.18
13.95
13.84
13.63
13.34
13.38
13.51
13.58
13.69
13.72
13.82
14.01
14
13.96
13.98
13.75
13.6
13.25
13.12
13.27
13.3
13.37
13.39
13.68
13.7
13.88
13.5
13.8
14
13.9
13.9
13.83
14
14.13
14.1
14.09
14.15
14.17
14.2
13.85
8/31/02 14
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%. 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 36.5%.
8
Nuveen California Dividend Advantage Municipal Fund
Performance
Overview As of August 31, 2002
NAC
Pie Chart:
CREDIT QUALITY
AAA/U.S. Guaranteed 54%
AA 6%
A 17%
BBB 16%
NR 7%
PORTFOLIO STATISTICS
--------------------------------------------------
Share Price $14.55
--------------------------------------------------
Common Share Net Asset Value $15.24
--------------------------------------------------
Market Yield 6.06%
--------------------------------------------------
Taxable-Equivalent Yield
(Federal Income Tax Rate)1 8.66%
--------------------------------------------------
Taxable-Equivalent Yield
(Federal and State Income Tax Rate)1 9.54%
--------------------------------------------------
Net Assets Applicable to
Common Shares ($000) $356,821
--------------------------------------------------
Average Effective Maturity (Years) 21.11
--------------------------------------------------
Leverage-Adjusted Duration 11.25
--------------------------------------------------
ANNUALIZED TOTAL RETURN (Inception 5/99)
--------------------------------------------------
ON SHARE PRICE ON NAV
--------------------------------------------------
1-Year 3.67% 6.75%
--------------------------------------------------
Since Inception 5.14% 8.06%
--------------------------------------------------
TOP FIVE SECTORS (as a % of total investments)
--------------------------------------------------
Tax Obligation/Limited 26%
--------------------------------------------------
Transportation 16%
--------------------------------------------------
Healthcare 11%
--------------------------------------------------
Housing/Multifamily 10%
--------------------------------------------------
Tax Obligation/General 9%
--------------------------------------------------
Bar Chart:
2001-2002 Monthly Tax-Free Dividends Per Share
9/01 0.0705
10/01 0.0705
11/01 0.0705
12/01 0.0705
1/02 0.0705
2/02 0.0705
3/02 0.0725
4/02 0.0725
5/02 0.0725
6/02 0.0735
7/02 0.0735
8/02 0.0735
Line Chart:
Share Price Performance
Weekly Closing Price
Past performance is not predictive of future results.
9/1/01 14.66
14.74
14.25
14.24
14.97
14.68
14.75
14.89
14.98
15.15
15.1
15.15
14.66
14.44
14.02
14.05
14.4
14.27
14.32
14.34
14.25
14.59
14.73
14.49
14.38
14.3
14.25
13.93
13.58
13.72
13.85
14.1
13.94
14.18
14.56
14.55
14.58
14.29
14.37
14.48
14.24
14.11
14.44
14.58
14.85
14.63
14.74
14.77
14.8
14.65
14.42
8/31/02 14.55
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%. 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 36.5%.
9
Nuveen California Dividend Advantage Municipal Fund 2
Performance
Overview As of August 31, 2002
NVX
Pie Chart:
CREDIT QUALITY
AAA/U.S. Guaranteed 79%
AA 4%
A 10%
BBB 4%
NR 3%
PORTFOLIO STATISTICS
--------------------------------------------------
Share Price $14.28
--------------------------------------------------
Common Share Net Asset Value $14.79
--------------------------------------------------
Market Yield 6.13%
--------------------------------------------------
Taxable-Equivalent Yield
(Federal Income Tax Rate)1 8.76%
--------------------------------------------------
Taxable-Equivalent Yield
(Federal and State Income Tax Rate)1 9.65%
--------------------------------------------------
Net Assets Applicable to
Common Shares ($000) $218,814
--------------------------------------------------
Average Effective Maturity (Years) 24.47
--------------------------------------------------
Leverage-Adjusted Duration 12.07
--------------------------------------------------
ANNUALIZED TOTAL RETURN (Inception 3/01)
--------------------------------------------------
ON SHARE PRICE ON NAV
--------------------------------------------------
1-Year -0.27% 3.90%
--------------------------------------------------
Since Inception 2.18% 8.09%
--------------------------------------------------
TOP FIVE SECTORS (as a % of total investments)
--------------------------------------------------
Tax Obligation/Limited 28%
--------------------------------------------------
Tax Obligation/General 20%
--------------------------------------------------
Healthcare 13%
--------------------------------------------------
Utilities 10%
--------------------------------------------------
Education and Civic Organizations 9%
--------------------------------------------------
Bar Chart:
2001-2002 Monthly Tax-Free Dividends Per Share
9/01 0.072
10/01 0.072
11/01 0.072
12/01 0.072
1/02 0.072
2/02 0.072
3/02 0.073
4/02 0.073
5/02 0.073
6/02 0.073
7/02 0.073
8/02 0.073
Line Chart:
Share Price Performance
Weekly Closing Price
Past performance is not predictive of future results.
9/1/01 15.07
15.04
14.41
15.07
15.2
15
14.95
14.74
15.14
15.1
15.1
14.76
14.89
14.75
14.44
13.97
13.75
14.02
14.37
14.49
14.46
14.48
14.52
14.37
14.45
14.39
14.1
13.79
13.64
13.91
13.69
13.77
13.93
13.95
14
14.25
13.85
14.14
14.24
14.05
13.91
13.81
14.15
14.14
14.49
14.42
14.32
14.27
14.44
14.54
14.35
8/31/02 14.28
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%. 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 36.5%.
10
Nuveen California Dividend Advantage Municipal Fund 3
Performance
Overview As of August 31, 2002
NZH
Pie Chart:
CREDIT QUALITY
AAA/U.S. Guaranteed 75%
AA 9%
A 11%
BBB 4%
NR 1%
PORTFOLIO STATISTICS
--------------------------------------------------
Share Price $14.00
--------------------------------------------------
Common Share Net Asset Value $14.33
--------------------------------------------------
Market Yield 6.17%
--------------------------------------------------
Taxable-Equivalent Yield
(Federal Income Tax Rate)1 8.81%
--------------------------------------------------
Taxable-Equivalent Yield
(Federal and State Income Tax Rate)1 9.72%
--------------------------------------------------
Net Assets Applicable to
Common Shares ($000) $345,470
--------------------------------------------------
Average Effective Maturity (Years) 26.06
--------------------------------------------------
Leverage-Adjusted Duration 12.55
--------------------------------------------------
CUMULATIVE TOTAL RETURN (Inception 9/01)
--------------------------------------------------
ON SHARE PRICE ON NAV
--------------------------------------------------
Since Inception -1.68% 5.32%
--------------------------------------------------
TOP FIVE SECTORS (as a % of total investments)
--------------------------------------------------
Tax Obligation/Limited 34%
--------------------------------------------------
Tax Obligation/General 20%
--------------------------------------------------
Water and Sewer 11%
--------------------------------------------------
Healthcare 9%
--------------------------------------------------
Education and Civic Organizations 8%
--------------------------------------------------
Bar Chart:
2001-2002 Monthly Tax-Free Dividends Per Share
11/01 0.072
12/01 0.072
1/02 0.072
2/02 0.072
3/02 0.072
4/02 0.072
5/02 0.072
6/02 0.072
7/02 0.072
8/02 0.072
Line Chart:
Share Price Performance
Weekly Closing Price
Past performance is not predictive of future results.
9/28/01 15.05
15.03
15.02
15.01
15.01
14.83
14.95
14.84
14.29
14.5
14.42
14.33
13.78
13.14
13.87
14.06
14.16
14.07
14.15
14.4
13.97
14.15
13.95
13.95
13.85
13.1
13.49
13.65
13.5
13.82
13.6
13.75
13.75
13.84
13.6
13.76
13.66
13.51
13.65
13.58
13.95
13.9
14.05
13.93
14
13.98
13.91
13.79
8/31/02 14
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%. 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 36.5%.
11
Nuveen Insured California Dividend Advantage Municipal Fund
Performance
Overview As of August 31, 2002
NKL
Pie Chart:
CREDIT QUALITY
Insured 100%
PORTFOLIO STATISTICS
--------------------------------------------------
Share Price $15.00
--------------------------------------------------
Common Share Net Asset Value $15.14
--------------------------------------------------
Market Yield 6.08%
--------------------------------------------------
Taxable-Equivalent Yield
(Federal Income Tax Rate)1 8.69%
--------------------------------------------------
Taxable-Equivalent Yield
(Federal and State Income Tax Rate)1 9.57%
--------------------------------------------------
Net Assets Applicable to
Common Shares ($000) $231,062
--------------------------------------------------
Average Effective Maturity (Years) 24.92
--------------------------------------------------
Leverage-Adjusted Duration 12.01
--------------------------------------------------
CUMULATIVE TOTAL RETURN (Inception 3/02)
--------------------------------------------------
ON SHARE PRICE ON NAV
--------------------------------------------------
Since Inception 2.05% 7.84%
--------------------------------------------------
TOP FIVE SECTORS (as a % of total investments)
--------------------------------------------------
Tax Obligation/Limited 32%
--------------------------------------------------
Tax Obligation/General 27%
--------------------------------------------------
Utilities 16%
--------------------------------------------------
Water and Sewer 10%
--------------------------------------------------
Education and Civic Organizations 7%
--------------------------------------------------
Bar Chart:
2002 Monthly Tax-Free Dividends Per Share
5/02 0.076
6/02 0.076
7/02 0.076
8/02 0.076
Line Chart:
Share Price Performance
Weekly Closing Price
Past performance is not predictive of future results.
3/28/02 15.15
15
15.05
15.05
15
15.05
15.11
15.08
15.05
15.05
15
14.9
14.84
14.99
14.95
15.22
15.05
14.9
15.1
15.01
15.18
15.1
8/31/02 15
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%. 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 36.5%.
12
V2
THE NUVEEN
INVESTOR
Photo of: Child standing on chair.
NOW'S THE TIME - MAKE THE MOST OF YOUR FINANCIAL ADVISOR
From the daily ups and downs of the stock market to atypically low interest
rates - and everything in between - it's hard to know how to invest your money
these days. It's all the more frustrating if you're a do-it-yourself investor.
--------------------------------------------------------------------------------
According to research conducted for the Forum for Investor Advice, almost half
of do-it-yourself investors said being able to access an advisor's
investment knowledge would be a primary reason for seeking advice.*
--------------------------------------------------------------------------------
Today more than ever, investors may want to consider using a financial advisor.
Investing is too important and often too complicated to go it alone. Many
investors need a professional who is not only knowledgeable, but someone who
understands their unique goals, time horizon and risk tolerance.
If you have an advisor or are looking to get established with one, consider
these six ways to make the most of what he or she has to offer.
o Education. Your advisor can help you understand asset classes, products and
financial terms - and the pros and cons of different investment types.
o Research. How is the investment managed? What are the tax consequences? Are
investment fundamentals in place? Let the professionals use their time,
connections and expertise to do the homework.
o Information. In survey after survey, "information" is what investors say
they need most from their financial advisors. Account statements, annual
reports, prospectuses - even your advisor's web site - are excellent
sources of information about your investments and financial news and
trends.
o Recommendations. Beyond information and analysis, your advisor can offer
advice, suggestions and insight culled from years of working through a
variety of market conditions.
--------------------------------------------------------------------------------
'(continued on page 17)
* The Study was conducted in December of 2000 by Market Facts and analyzed by
New York based Neuwirth Research.
Volume TWO 2002
INSIDE
13 Now's the Time -- Make the Most of Your Financial Advisor
14 Why Professional Management Makes Sense with Municipal Bond Investing
15 Today's Investing Waters Are Deep and Turbulent. Some Are Uncharted.
Be Sure You're Prepared to...NAVIGATE THE CURRENTS
16 Investing Math
17 Did You Know...?
18 Fund Reports Available Online
18 ETFConnect: The Source for All Exchange-Traded Funds
(C)2002 Nuveen Investments.
All rights reserved.
Logo: NUVEEN Investments
13
V2
WHY PROFESSIONAL MANAGEMENT MAKES SENSE WITH MUNICIPAL BOND INVESTING
Municipal bonds, the fourth largest capital market in the United States, have
become increasingly popular with individual investors. Federal Reserve Board
data shows that individuals owned more than a third, or $582.3 billion, of the
$1.7 trillion of municipal bonds outstanding on December 31, 2001.
Municipal bonds might be even more popular with individual investors if
investing were simple and straightforward. But it isn't. The fact that municipal
bonds are complex keeps many retail investors at bay. However, with professional
management, the complexities of municipal bonds may be alleviated.
WHAT MAKES MUNICIPAL BONDS SO COMPLICATED?
For starters, the municipal bond market is one of the most fragmented and
inefficient of U.S. financial markets. More than 1.5 million issues from 50,000
issuers trade in an institutionally dominated, negotiated market with no central
exchange.
This context poses several difficulties for retail investors. First and
foremost, current information on municipal bonds, industry conditions and market
dynamics isn't readily available to non-professionals. Most information
circulates through professional channels among institutional investors, making
research all but impossible for individuals.
Professional portfolio managers buy in volume, while retail investors tend to be
interested in smaller trades, or "odd lots" that sell for less than $25,000 or
$50,000. This means individuals seldom obtain the best prices. Individual
investors further lament that markups to cover a dealer's bond-selling costs are
both prohibitive and non-standardized.
If an individual investor is persistent and confident enough to take the plunge
into municipals, he or she might be forced to adhere to a buy-and-hold strategy
of bonds with different maturities, or what is commonly called a laddered
portfolio. However, bond calls can disturb laddering strategies and force
reinvestment decisions at inopportune times.
WHAT'S AN INDIVIDUAL INVESTOR TO DO?
Because of the municipal market's inefficiencies and intricacies, an individual
investor may want to rely on a major market participant when considering
municipal bonds. If an individual investor is considering a municipal bond
investment they may want to look at Nuveen's municipal closed-end
exchange-traded funds. Nuveen has over 100 years experience in the municipal
bond market and as an influential market leader, it has the ability to negotiate
some of the best possible prices. Continuous evaluation and monitoring of the
market allows Nuveen to identify investment opportunities and capitalize on
market dynamics such as "riding down the yield curve." Simply put, Nuveen buys
bonds and sells them before maturity or call date to try to capture any
potential gains.
For more information about how professional management of municipal bonds can be
used to meet your investing goals, talk with your financial advisor.
Photo of: Child with net for fishing.
Photo of: Man fishing.
The Nuveen Investor Vol 02.2
Logo: NUVEEN Investments
14
V2
TODAY'S INVESTING WATERS ARE DEEP AND TURBULENT. SOME ARE UNCHARTED. BE SURE
YOU'RE PREPARED TO... NAVIGATE THE CURRENTS
INDIVIDUALS WHO INVESTED IN STOCKS IN THE 1990S GOT SPOILED. THEY CAME TO EXPECT
DOUBLE-DIGIT ANNUAL RETURNS. EVEN FOR THAT BRIEF FOUR-MONTH PERIOD BETWEEN JULY
AND OCTOBER 1998, WHEN THE MARKET DROPPED MORE THAN 15%, INVESTORS WHO STAYED
THE COURSE WERE REWARDED WITH A 50% GAIN IN THE MARKET OVER THE NEXT EIGHT
MONTHS, AS REPRESENTED BY THE RETURNS OF THE S&P 500.
BUT THEN CAME TECHNOLOGY WOES AND THE VIRTUAL DISAPPEARANCE OF ONCE-PROMISING
DOT-COMS. OUR FINANCIAL BUBBLE BURST. SINCE THEN, A SLUGGISH ECONOMY, TERRORIST
ATTACKS AND CORPORATE FRAUD HAVE TAKEN THEIR TOLL. RECENT STOCK MARKET LOSSES
HAVE LEFT MOST INVESTORS WONDERING HOW TO NAVIGATE THROUGH ROUGH INVESTING
WATERS. DESPITE STORMY CONDITIONS, YOU CAN STILL REACH YOUR FINANCIAL GOALS.
IT'S A MATTER OF FOLLOWING SEVERAL TIME-HONORED INVESTING PRINCIPLES....
DIVERSIFY BY ASSET CLASS AND SECTOR.
By investing across asset classes, market capitalizations and economic sectors,
you balance risk and reward, growth and income. Stocks and fixed-income
investments - and different industries - react differently in different economic
environments.
INVEST IN REAL ESTATE FOR GREATER DIVERSIFICATION.
Real estate has a low correlation to other asset classes, and over time,
investors have benefited from continuous, steady growth.1
INVEST IN QUALITY.
The best-performing portfolios tend to be weighted with funds, bonds and stocks
of companies that have true financial strength and proven records of growth and
profitability.
CONSIDER DOLLAR-COST AVERAGING.
Instead of waiting and trying to buy a stock at its lowest price, invest a
consistent amount of money on a regular basis, regardless of the price. Your
average cost per share may be less than the average price per share. Dollar cost
averaging does not ensure a profit or protect against loss in a declining
market. Because such a plan involves continuous investment, investors should
consider their financial ability to continue purchases through periods of low
price levels.
EXPECT MARKET FLUCTUATIONS.
Intra-day movements up or down 100 points are becoming more the norm than the
exception. Keep those shifts of 100+ points in perspective. A 100-point move
represents about a 1% movement in the Dow Jones Industrial Average at its
current level.
AVOID FREQUENT TRADING.
With day-to-day market fluctuations, it's tempting to jump from investment to
investment to try to avoid losses.
TAKE A LONG-TERM VIEW.
Successful navigation through investing waters has more to do with time than
timing. There have been 13 bear markets since 1929, averaging three to 41 months
and plummeting an average 39% each time. Nine of those bear markets occurred
between 1970 and 2000. Yet Bloomberg Financial Reports notes that, over the same
30-year period, the stock market rose over 15-fold.1 Base your performance
expectations on long-term trends rather than short-term swings.
The key to navigating tempestuous financial waters is to keep your sights set on
reaching your long-term goals. Let your financial advisor and common sense be
your guide as you review your portfolio and chart your course for financial
success.
1 Past performance is not an indication of future results.
The Nuveen Investor Vol 02.2
Logo: NUVEEN Investments
15
V2
INVESTING MATH
These hypothetical examples are for illustrative purposes only and are not
intended to represent the performance of any Nuveen investment.
Q: Investor A gets a 10% return in Year One on his investment of $1000 and
loses 5% in Year Two. Investor B loses 5% in Year One on her investment of
$1000 and earns 10% in Year Two. Who comes out ahead?
A: They tie. Investor A has $1100 at the end of Year One and $1045 after Year
Two. Investor B has $950 at the end of Year One and $1045 after Year Two.
True or False?
By investing $100 per month for 30 years, you could end up with more than
$100,000.
True, as long as your investment compounds at 6% interest per year
or more.*
Compound
$100 per Total Yield at 6%
month for Investment interest/year
--------------------------------------------------
1 year $ 1,200 $ 1,234
--------------------------------------------------
5 years $ 6,000 $ 6,977
--------------------------------------------------
10 years $ 12,000 $ 16,388
--------------------------------------------------
15 years $ 18,000 $ 29,082
--------------------------------------------------
20 years $ 24,000 $ 46,204
--------------------------------------------------
25 years $ 30,000 $ 69,299
--------------------------------------------------
30 years $ 36,000 $ 100,452
--------------------------------------------------
Q: When is 6% really 8.5%...and 5% really 3.5%?
A: When 6% is earned on a tax-free investment, such as a municipal bond fund,
and the 5% is the yield on a taxable investment in the 30% tax bracket. You
can determine the equivalent yield a taxable investment would have to pay
for you to net the same amount after tax, compared to the yield on a
tax-exempt investment. Use the formula: E = B -: (1-T). B is the tax-exempt
yield, T is your personal income tax bracket, and E is the taxable
equivalent yield.
True or False?
It will take 24 years for you to double your money if you put your money
in a savings account or other investment paying 3%.
True, this is commonly known as the Rule of 72. All you need to do is take
the number 72 and divide it by the interest rate you receive. The answer
will be the number of years it takes to double your money.
Interest Years to Double
Rate % Your Money
-----------------------------------------------
1% 72.0
-----------------------------------------------
3% 24.0
-----------------------------------------------
5% 14.4
-----------------------------------------------
7% 10.3
-----------------------------------------------
9% 8.0
-----------------------------------------------
* This investment assumes that all interest is reinvested and compounded on a
monthly basis.
Photo of: 2 people on sailboat.
Photo of: Child with toy sailboat.
The Nuveen Investor Vol 02.2
Logo: NUVEEN Investments
16
V2
--------------------------------------------------------------------------------
(continued from page 13)
o Perspective. When the market or a particular investment is down, it's great
to have a financial advisor to remind you of your long-term goals,
discourage panic and suggest alternatives.
o Assessment. Your advisor can help you monitor and evaluate how well your
portfolio and individual investments are performing vis-a-vis your goals.
One last thought: communication is vital. Your advisor will be able to best meet
your needs when you provide information about yourself and what you want from
your investments. Give your advisor as much information as you expect to get.
ADVISOR CHECKLIST
When you meet with your financial advisor, you'll want to be prepared to
talk about...
o Adjusting (or setting) financial goals.
o Evaluating (or developing) your investment strategy, so it's aligned to
achieve your short- and long- term goals.
o Any major life events, such as marriage, birth of a child or disability of
a spouse.
o Rebalancing your portfolio.
o Investing for retirement.
o Minimizing your tax liability.
o Bringing your estate plan up to date.
o Other financial issues, such as life insurance, credit card debt or
mortgage information.
--------------------------------------------------------------------------------
DID YOU KNOW...?
o The Forum for Investment Advice reports that a Dow Jones Industrial Average
decline of 15% or more typically occurs about once very two years.
o According to the Federal Deposit Insurance Corp., investors lost $114
million from May 1999 to May 2002 because they went over the FDIC's
$100,000-per-depositor insurance limit, or because they deposited their
money unknowingly in uninsured banks. Check your institution's coverage
amounts at www2.fdic.gov/edie.
o Financial experts suggest that you have no more than 25 % of your 401(k)
assets in company stock.
o The municipal bond market trades $9.5 billion worth of bonds on an average
day.
o According to US News and World Report, the average age of retirement in
industrialized countries is 59.2 years in France, 60.5 in Germany, 60.6 in
Italy, 62.3 in Canada, 62.7 in the United Kingdom, 63.6 in the USA and 66.5
in Japan.
o Banks frequently use different methods to calculate interest. To compare
how much money you'll earn at different banks, ask for each account's
"annual percentage yield." Only APYs are calculated the same way from bank
to bank.
The Nuveen Investor Vol 02.2
Logo: NUVEEN Investments
17
V2
LOOK AHEAD...
FUND REPORTS AVAILABLE ONLINE
2 ILLUSTRATIONS OF: INVESTORDELIVERY.COM WEBSITE.
Nuveen Fund information is now available online. Once you register, you'll
receive an e-mail notice with a link to your Fund's reports and other
information just as soon as it is ready. Registering takes only a few minutes.
If you receive statements from a brokerage firm or financial advisor, go to
www.investordelivery.com. Enter your personal 13-character enrollment number
imprinted on the address sheet of this report near your name. From the options
on the follow-up page, select the New Enrollment-Create screen. Once there,
enter your e-mail address and a personal, four-digit PIN. Hit the Submit button.
Confirm the information you entered is correct, then hit Submit again.
If you receive statements directly from Nuveen, go to www.nuveen.com. Select the
Access Your Account tab, then select E-Report Enrollment. Finally, click on the
Enrollment Page. Once there, you'll need to provide your social security number
and e-mail address. Click on Enroll.
After registering, you should receive a confirming e-mail within 24 hours. If
not, repeat these steps to ensure all information is accurate. You can use this
same process if you need to change your registration information or want to
cancel Internet viewing. The e-mail address you provide is strictly confidential
and will only be used to notify you of shareholder information.
--------------------------------------------------------------------------------
The information in this newsletter should not be construed as specific tax or
investment advice. Contact your advisor for information about your particular
situation.
--------------------------------------------------------------------------------
ETFCONNECT:
THE SOURCE FOR ALL EXCHANGE-TRADED FUNDS
Last fall, Nuveen launched ETFConnect, the industry's first website
featuring all-encompassing information on exchanged-traded funds. Whatever
you're looking for in the world of Index ETFs or Closed-End Exchange-Traded
Funds - prices, NAVs, dividend information, performance histories, new
developments - this is the place. Highlights include Quick Facts sheets for more
than 500 funds, a multi-fund search capability, website links, a list of fund
sponsors, tools for portfolio tracking, and a continually updated education
center. Check out www.etfconnect.com.
ILLUSTRATION OF: ETFCONNECT WEBSITE.
The Nuveen Investor Vol 02.2
Logo: NUVEEN Investments
18
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
NUVEEN CALIFORNIA DIVIDEND ADVANTAGE MUNICIPAL FUND 3
NUVEEN INSURED CALIFORNIA DIVIDEND ADVANTAGE MUNICIPAL FUND
We have audited the accompanying statements of assets and liabilities, 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, Nuveen California Dividend Advantage
Municipal Fund 2, Nuveen California Dividend Advantage Municipal Fund 3, and
Nuveen Insured California Dividend Advantage Municipal Fund as of August 31,
2002, 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 these 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 and financial highlights. Our procedures included
confirmation of investments owned as of August 31, 2002, by correspondence with
the custodian and brokers or other appropriate auditing procedures where replies
from brokers were not received. 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,
Nuveen California Dividend Advantage Municipal Fund 2, Nuveen California
Dividend Advantage Municipal Fund 3, and Nuveen Insured California Dividend
Advantage Municipal Fund at August 31, 2002, 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 11, 2002
19
Nuveen Insured California Premium Income Municipal Fund, Inc. (NPC)
Portfolio of
Investments August 31, 2002
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION PROVISIONS* RATINGS** VALUE
-----------------------------------------------------------------------------------------------------------------------------------
EDUCATION AND CIVIC ORGANIZATIONS - 10.0%
$ 2,000 California Educational Facilities Authority, Revenue Bonds (Santa 9/06 at 102.00 AAA $ 2,128,280
Clara University), Series 1996, 5.750%, 9/01/26
6,620 California Educational Facilities Authority, Revenue Bonds (Loyola No Opt. Call Aaa 1,112,425
Marymount University), Series 2001A Refunding,
0.000%, 10/01/35
5,000 California Educational Facilities Authority, Student Loan Revenue 3/08 at 102.00 Aaa 5,182,700
Bonds (California Loan Program), Series 2001A,
5.400%, 3/01/21 (Alternative Minimum Tax)
2,000 The Regents of the University of California, Multiple Purpose 9/10 at 101.00 AAA 2,032,880
Projects Revenue Bonds, 2002 Series O, 5.125%, 9/01/31
-----------------------------------------------------------------------------------------------------------------------------------
HEALTHCARE - 9.4%
3,000 California Health Facilities Financing Authority, Insured Revenue 8/08 at 101.00 AAA 3,107,070
Bonds (Sutter Health), Series 1998A, 5.375%, 8/15/30
1,500 California Statewide Communities Development Authority, 8/09 at 101.00 AAA 1,616,040
Certificates of Participation (Members of the Sutter Health
Obligated Group), 5.500%, 8/15/19
4,800 The Regents of the University of California, Hospital Revenue 7/06 at 101.00 AAA 5,078,784
Bonds (University of California Davis Medical Center),
Series 1996, 5.750%, 7/01/24
-----------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY - 8.4%
1,000 ABAG Financing Authority for Nonprofit Corporations, California, 9/09 at 100.00 AAA 1,058,510
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 2/03 at 102.00 Aa2 3,746,251
Housing Revenue Bonds, Series 1992A-II, 6.625%, 2/01/24
(Alternative Minimum Tax)
3,900 City of Los Angeles, California, Tax-Exempt Mortgage Revenue 1/03 at 102.00 AAA 3,945,903
Refunding Bonds (FHA-Insured Mortgage Loans - Section 8
Assisted Projects), Series 1993A, 6.300%, 1/01/25
-----------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 4.3%
1,310 California Housing Finance Agency, Single Family Mortgage 2/07 at 102.00 AAA 1,388,273
Bonds II, 1997 Series A-1, 6.000%, 8/01/20 (Alternative
Minimum Tax)
3,000 California Housing Finance Agency, Home Mortgage Revenue 8/08 at 101.00 AAA 3,117,540
Bonds, Series 1998Q, 5.050%, 8/01/17
-----------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 31.8%
State of California, Various Purpose General Obligation Bonds:
7,995 5.750%, 3/01/22 3/10 at 101.00 AAA 8,722,625
2,000 5.750%, 3/01/27 3/10 at 101.00 AAA 2,170,020
2,000 State of California, Veterans General Obligation Bonds, 2001 6/07 at 101.00 AAA 2,022,380
Series BZ, 5.375%, 12/01/24 (Alternative Minimum Tax)
1,225 Fresno Unified School District, Fresno County, California, 1998 2/13 at 103.00 AAA 1,483,977
General Obligation Refunding Bonds, Series A, 6.550%, 8/01/20
2,500 Fresno Unified School District, Fresno County, California, General 8/09 at 102.00 AAA 2,544,675
Obligation Bonds (Election of 2001), Series 2001A,
5.125%, 8/01/26
2,000 Los Angeles Unified School District, California, General 7/08 at 102.00 AAA 2,051,360
Obligation Bonds, 1997 Series A, 5.000%, 7/01/21
500 Los Angeles Unified School District, California, General 7/10 at 100.00 AAA 520,715
Obligation Bonds (Election of 1997), Series 2000D,
5.375%, 7/01/25
20
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION PROVISIONS* RATINGS** VALUE
-----------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL (continued)
$ 3,000 Pomona Unified School District, California, General Obligation 8/11 at 103.00 AAA $ 3,582,120
Refunding Bonds, Series 1997-A, 6.500%, 8/01/19
San Diego Unified School District, San Diego County, California,
General Obligation Bonds (Election of 1998), Series 2001C:
1,335 5.000%, 7/01/21 7/11 at 102.00 AAA 1,379,509
3,500 5.000%, 7/01/22 7/11 at 102.00 AAA 3,589,635
4,895 5.000%, 7/01/23 7/11 at 102.00 AAA 4,982,865
-----------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 21.9%
2,000 State Public Works Board of the State of California, Department 11/09 at 101.00 AAA 2,165,500
of Health Services, Lease Revenue Bonds (Richmond Laboratory
Project), 1999 Series A, 5.750%, 11/01/24
5,000 City of El Monte, California, Certificates of Participation 1/11 at 100.00 AAA 5,133,750
(Department of Public Services Facility Phase II), Senior Lien
Series 2001, 5.250%, 1/01/34
2,135 City of San Buenaventura, California, 1993 Refunding 1/03 at 100.00 AAA 2,156,734
Certificates of Participation (Capital Improvements Project),
5.500%, 1/01/17
3,890 Santa Clara County Financing Authority, California, Lease 11/07 at 102.00 AAA 3,961,576
Revenue Bonds (VMC Facility Replacement Project),
1994 Series A, 5.000%, 11/15/22
6,500 Tustin Unified School District, Orange County, California, 9/12 at 100.00 AAA 6,539,650
Special Tax Bonds (Community Facilities District No. 97-1),
2002 Series A, 5.000%, 9/01/32
2,805 Yucaipa-Calimesa Joint Union School District, San Bernardino 10/11 at 100.00 AAA 2,818,099
County, California, General Obligation Bonds, Series 2001A
Refunding, 5.000%, 10/01/31
-----------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED - 26.3%
6,000 Huntington Park Redevelopment Agency, California, Single No Opt. Call AAA 8,605,380
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 7,102,578
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 9,473,060
Bonds (GNMA Mortgage-Backed Securities Program),
Issue 1987A, 9.000%, 5/01/21 (Alternative Minimum Tax)
1,485 City of San Jose, California, Single Family Mortgage Revenue No Opt. Call AAA 2,231,064
Bonds, 1985 Series A, 9.500%, 10/01/13
-----------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 7.9%
4,000 California Pollution Control Financing Authority, Pollution 12/02 at 102.00 AAA 4,119,760
Control 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 102.00 A+ 4,105,720
Bonds (San Diego Gas and Electric Company), 1992 Series A,
6.400%, 12/01/27 (Alternative Minimum Tax)
-----------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 21.0%
7,000 City of Los Angeles, California, Wastewater System Revenue 11/03 at 102.00 AAA 7,049,770
Bonds, Series 1993D, 4.700%, 11/01/19
3,400 Public Facilities Financing Authority of the City of San Diego, 5/07 at 101.00 AAA 3,523,454
California, Sewer Revenue Bonds, Series 1997A,
5.250%, 5/15/22
2,150 Santa Clara Valley Water District, California, Water Utility System 6/10 at 100.00 AAA 2,178,660
Revenue Bonds, Series 2000A, 5.125%, 6/01/31
5,000 Wheeler Ridge-Maricopa Water Storage District, Kern County, 11/06 at 102.00 AAA 5,597,750
California, 1996 Water Refunding Bonds, 5.700%, 11/01/15
3,425 City of Woodland, Yolo County, California, Certificates of 3/03 at 100.00 AAA 3,469,045
Participation (1992 Wastewater System Refunding Project),
5.500%, 3/01/18
-----------------------------------------------------------------------------------------------------------------------------------
$ 138,875 Total Investments (cost $133,980,783) - 141.0% 146,796,087
=============----------------------------------------------------------------------------------------------------------------------
21
Nuveen Insured California Premium Income Municipal Fund, Inc. (NPC) (continued)
Portfolio of Investments August 31, 2002
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION PROVISIONS* RATINGS** VALUE
-----------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 4.8%
$ 5,000 Irvine Ranch Water District, California, Variable Rate Demand VMIG-1 $ 5,000,000
============= Bonds, Consolidated Series 105, 140, 240 and 250,
1.750%, 1/01/21+
-------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - (2.6)% (2,659,444)
-------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (43.2)% (45,000,000)
-------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $104,136,643
===================================================================================================================
All of the bonds in the portfolio, excluding temporary
investments in short-term municipal securities, 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.
+ 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.
22
Nuveen Insured California Premium Income Municipal Fund 2, Inc. (NCL)
Portfolio of
Investments August 31, 2002
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION PROVISIONS* RATINGS** VALUE
-----------------------------------------------------------------------------------------------------------------------------------
EDUCATION AND CIVIC ORGANIZATIONS - 10.5%
California Educational Facilities Authority, Revenue Bonds (Santa
Clara University), Series 1996:
$ 2,400 5.750%, 9/01/21 9/06 at 102.00 AAA $ 2,563,080
3,000 5.750%, 9/01/26 9/06 at 102.00 AAA 3,192,420
2,000 California Educational Facilities Authority, Revenue Bonds 11/10 at 100.00 Aaa 2,222,940
(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 1,241,503
6,615 0.000%, 10/01/34 No Opt. Call Aaa 1,174,956
5,000 California Educational Facilities Authority, Student Loan Revenue 3/08 at 102.00 Aaa 5,182,700
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 101.00 AAA 1,407,989
1,000 5.500%, 6/01/20 6/10 at 101.00 AAA 1,083,120
1,900 The Regents of the University of California, University of 11/03 at 102.00 AAA 1,992,948
California Housing System Revenue Bonds, Series A,
5.500%, 11/01/18
-----------------------------------------------------------------------------------------------------------------------------------
HEALTHCARE - 5.2%
1,450 California Health Facilities Financing Authority, Insured Health 7/06 at 102.00 AAA 1,623,029
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 102.00 AAA 5,461,350
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 1/10 at 100.00 AAA 2,762,325
Harrison Foundation - Kaiser Permanente), Series 1999A,
6.000%, 1/01/29
-----------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY - 9.2%
ABAG Financing 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 100.00 AAA 4,234,040
1,370 5.875%, 3/01/32 (Alternative Minimum Tax) 9/09 at 100.00 AAA 1,438,445
3,785 Community Redevelopment Agency of the City of Los Angeles, 6/05 at 105.00 AAA 4,220,124
California, Multifamily Housing Revenue Refunding Bonds
(Angelus Plaza Project), 1995 Series A, 7.400%, 6/15/10
7,400 Housing Authority of the County of Santa Cruz, California, 5/03 at 102.00 Aaa 7,611,122
Tax-Exempt Multifamily Housing Revenue Refunding Bonds
(GNMA Collateralized - Meadowview Apartments),
Series 1993A, 6.125%, 5/20/28
-----------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 2.4%
3,910 California Housing Finance Agency, Single Family Mortgage 8/07 at 101.50 AAA 4,090,838
Bonds II, 1997 Series C-2, 5.625%, 8/01/20 (Alternative
Minimum Tax)
565 California Housing Finance Agency, Home Mortgage Revenue 2/06 at 102.00 AAA 584,436
Bonds, 1996 Series E, 6.150%, 8/01/25 (Alternative
Minimum Tax)
-----------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 16.5%
1,460 ABC Unified School District, Los Angeles County, California, 8/10 at 101.00 AAA 1,643,113
General Obligation Bonds (Election of 1997), Series B,
5.750%, 8/01/16
485 State of California, Veterans General Obligation Welfare Bonds, 12/03 at 102.00 AAA 490,636
Series 1997BH, 5.500%, 12/01/24 (Alternative Minimum Tax)
23
Nuveen Insured California Premium Income Municipal Fund 2, Inc. (NCL) (continued)
Portfolio of Investments August 31, 2002
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 101.00 AAA $ 8,722,625
2,500 5.500%, 9/01/24 9/09 at 101.00 AAA 2,643,225
2,000 5.750%, 3/01/27 3/10 at 101.00 AAA 2,170,020
3,000 State of California, Veterans General Obligation Bonds, 6/07 at 101.00 AAA 3,033,570
2001 Series BZ, 5.375%, 12/01/24 (Alternative Minimum Tax)
2,575 Calipatria Unified School District, Imperial County, California, 8/06 at 102.00 AAA 2,852,225
General Obligation Bonds, 1996 Series A, 5.625%, 8/01/13
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 102.00 AAA 1,106,673
1,160 5.125%, 8/01/22 8/09 at 102.00 AAA 1,196,818
1,220 5.125%, 8/01/23 8/09 at 102.00 AAA 1,250,671
1,500 Hacienda La Puente Unified School District, Los Angeles County, 8/10 at 101.00 AAA 1,554,510
California, General Obligation Bonds (Election of 2000),
Series A, 5.250%, 8/01/25
1,750 Lake Tahoe Unified School District, El Dorado County, 8/09 at 100.00 AAA 1,804,653
California, General Obligation Bonds (Election of 1999),
Series A, 5.250%, 8/01/24
1,125 San Diego Unified School District, California, 1999 General No Opt. Call AAA 437,704
Obligation Bonds (Election of 1998), Series A, 0.000%, 7/01/21
2,500 San Francisco Community College District, California, General 6/10 at 102.00 Aaa 2,523,925
Obligation Bonds, 2002 Series A, 5.000%, 6/15/26
-----------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 52.7%
Anaheim Public Financing Authority, California, Subordinate
Lease Revenue Bonds (Anaheim Public Improvements Project), 1997
Series C:
5,130 0.000%, 9/01/18 No Opt. Call AAA 2,396,531
8,000 0.000%, 9/01/21 No Opt. Call AAA 3,090,080
1,800 California Public School District Financing Authority, Lease 9/06 at 102.00 AAA 2,023,416
Revenue 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, Department 1/06 at 100.00 AAA 5,359,147
of Corrections, Lease Revenue Bonds (California Substance
Abuse Treatment Facility and State Prison at Corcoran II),
1996 Series A, 5.250%, 1/01/21
3,450 State Public Works Board of the State of California, Department 11/09 at 101.00 AAA 3,735,488
of Health Services, Lease Revenue Bonds (Richmond Laboratory
Project), 1999 Series A, 5.750%, 11/01/24
5,000 Community Redevelopment Agency of the City of Compton, 8/05 at 102.00 AAA 5,665,700
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 102.00 AAA 4,233,760
(Merrithew Memorial Hospital Replacement Project),
Refunding Series 1997, 5.500%, 11/01/22
6,000 City of El Monte, California, Certificates of Participation 1/11 at 100.00 AAA 6,145,440
(Department of Public Services Facility Phase II), Senior
Lien Series 2001, 5.000%, 1/01/21
3,000 Galt Schools Joint Powers Authority, Sacramento County, 11/07 at 102.00 AAA 3,246,390
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 5/08 at 102.00 AAA 5,112,850
Certificates of Participation, 1998 Series A, 5.200%, 5/01/28
5,000 La Quinta Redevelopment Agency, California, Project Area No. 1 9/07 at 102.00 AAA 5,101,950
Tax Allocation Bonds, Series 1998 Refunding, 5.200%, 9/01/28
3,865 Los Angeles County Metropolitan Transportation Authority, 7/10 at 101.00 AAA 3,987,405
California, Proposition C Sales Tax Revenue Bonds, Second
Senior Lien Series 2000A, 5.250%, 7/01/30
1,980 Menifee Union School District, Riverside County, California, 9/06 at 102.00 AAA 2,217,224
Certificates of Participation (1996 School Project),
6.125%, 9/01/24
2,690 Norwalk Community Facilities Financing Authority, Los Angeles 9/05 at 102.00 AAA 3,004,838
County, California, Tax Allocation Refunding Revenue Bonds,
1995 Series A, 6.000%, 9/01/15
24
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION PROVISIONS* RATINGS** VALUE
-----------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED (continued)
$ 2,000 Poway Redevelopment Agency, California, Tax Allocation Refunding 12/10 at 102.00 AAA $ 2,192,360
Bonds (Paguay Redevelopment Project), Series 2000,
5.750%, 6/15/33
9,000 City of Redlands, California, Certificates of Participation 9/03 at 102.00 AAA 9,500,580
(1993 Refunding of 1986 and 1987 Projects), 5.800%, 9/01/17
5,000 City of San Bernardino Joint Powers Financing Authority, 9/09 at 102.00 AAA 5,416,300
California, 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 101.00 AAA 3,679,900
Tax Revenue Bonds, Series 1999, 5.500%, 7/01/34
1,930 Santa Margarita/Dana Point Authority, Orange County, California, No Opt. Call AAA 2,230,192
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 (Foothill Area), 1994 Series C:
3,000 8.000%, 8/15/08 No Opt. Call AAA 3,861,060
6,830 8.000%, 8/15/09 No Opt. Call AAA 8,947,642
3,770 Redevelopment Agency of the City of Suisun, County of Solano, 10/03 at 102.00 AAA 3,956,766
California, 1993 Tax Allocation Refunding Bonds (Suisun City
Redevelopment Project), 5.900%, 10/01/23
5,450 City of Visalia Public Financing Authority, California, Refunding 12/06 at 102.00 AAA 5,624,564
Certificates of Participation (Motor Vehicle License Fee
Enhancement), Series 1996A, 5.375%, 12/01/26
-----------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 8.9%
6,500 Foothill/Eastern Transportation Corridor Agency, California, 1/10 at 65.32 AAA 2,964,910
Toll Road Refunding Revenue Bonds, Series 1999,
0.000%, 1/15/18
3,000 Foothill/Eastern Transportation Corridor Agency, California, 1/10 at 100.00 AAA 3,008,940
Toll Road Revenue Bonds, Series 1995A, 5.000%, 1/01/35
2,000 Airports Commission of the City and County of San Francisco, 1/08 at 102.00 AAA 2,001,680
California, San Francisco International Airport, Second Series
Revenue Bonds, Issue 15A, 5.000%, 5/01/28 (Alternative
Minimum Tax)
5,000 Airports Commission of the City and County of San Francisco, 5/11 at 100.00 AAA 5,081,450
California, San Francisco International Airport, Second Series
Revenue Refunding Bonds, Issue 27A, 5.250%, 5/01/31
(Alternative Minimum Tax)
3,750 San Jose, California, Airport Revenue Bonds, Series 1993, 3/03 at 102.00 AAA 3,845,400
5.700%, 3/01/18 (Alternative Minimum Tax)
-----------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED - 18.4%
3,525 County of Alameda Public Facilities Corporation, California, 9/06 at 102.00 AAA 4,136,024
Certificates of Participation (1991 Financing Project),
6.000%, 9/01/21 (Pre-refunded to 9/01/06)
4,485 County of Alameda, California, 1993 Refunding Certificates of 12/03 at 102.00 AAA 4,815,231
Participation (Santa Rita Jail Project), 5.700%, 12/01/14
(Pre-refunded to 12/01/03)
3,000 Central Unified School District, Fresno County, California, 3/03 at 102.00 AAA 3,117,450
General Obligation Bonds (Election of 1992), 5.625%, 3/01/18
(Pre-refunded to 3/01/03)
3,000 Escondido Union High School District, San Diego County, 11/06 at 102.00 AAA 3,342,360
California, General Obligation Bonds (Election of 1996),
5.700%, 11/01/10
4,320 County of Riverside, California, Single Family Mortgage No Opt. Call AAA 6,233,933
Revenue Bonds (GNMA Mortgage-Backed Securities
Program), Issue 1987B, 8.625%, 5/01/16 (Alternative
Minimum Tax)
1,850 Sacramento City Unified School District, Sacramento County, 7/09 at 102.00 Aaa 2,208,327
California, General Obligation Bonds, Series 2000A,
5.750%, 7/01/18 (Pre-refunded to 7/01/09)
9,000 Airports Commission of the City and County of San 5/04 at 101.00 AAA 9,787,230
Francisco, California, San Francisco International Airport,
Second Series Revenue Bonds, Issue 8B, 6.100%, 5/01/20
(Pre-refunded to 5/01/04)
1,515 City of Torrance, California, Hospital Revenue Bonds (Little 12/05 at 100.00 AAA 1,721,873
Company of Mary Hospital), 1985 Series A, 7.100%, 12/01/15
(Pre-refunded to 12/01/05)
25
Nuveen Insured California Premium Income Municipal Fund 2, Inc. (NCL) (continued)
Portfolio of Investments August 31, 2002
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION PROVISIONS* RATINGS** VALUE
-----------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 13.1%
$ 3,740 California Pollution Control Financing Authority, Pollution Control 9/09 at 101.00 AAA $ 3,856,688
Revenue Refunding Bonds (Southern California Edison Company),
Series 1999B, 5.450%, 9/01/29
3,215 Modesto Irrigation District Financing Authority, California, 10/06 at 102.00 AAA 3,660,888
Refunding Revenue Bonds, Series A, 6.000%, 10/01/15
3,000 Puerto Rico Electric Power Authority, Power Revenue Bonds, 7/12 at 101.00 AAA 3,085,770
2002 Series II, 5.125%, 7/01/26
1,790 Sacramento City Financing Authority, California, Capital 12/09 at 102.00 AAA 1,988,457
Improvement Revenue Bonds (Solid Waste and Redevelopment
Projects), Series 1999, 5.800%, 12/01/19
3,500 Sacramento Municipal Utility District, California, Electric 8/06 at 102.00 AAA 3,675,140
Revenue Bonds, 1996 Series J, 5.600%, 8/15/24
1,950 Salinas Valley Solid Waste Authority, California, Revenue 8/12 at 100.00 AAA 1,984,008
Bonds, Series 2002, 5.250%, 8/01/27 (Alternative Minimum Tax)
6,650 Turlock Irrigation District, California, Revenue Bonds, 1/03 at 100.00 AAA 6,666,492
Series 1992A Refunding, 5.750%, 1/01/18
-----------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 11.6%
3,530 Castaic Lake Water Agency, California, Refunding Revenue No Opt. Call AAA 3,967,508
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 102.00 AAA 3,259,202
Bonds (Chino Basin Municipal Water District Sewer System
Project), Series 1994, 6.000%, 8/01/16
2,775 Pomona Public Financing Authority, California, 1999 Revenue 5/09 at 101.00 AAA 2,916,941
Bonds (Water Facilities Project), Series AC, 5.500%, 5/01/29
1,000 Sacramento County Sanitation Districts Financing Authority, 12/10 at 101.00 AAA 1,087,779
California, Revenue Bonds (Sacramento Regional County
Sanitation District), Series 2000A, 5.500%, 12/01/20
2,900 City and County of San Francisco, California, Sewer Revenue 10/02 at 102.00 AAA 2,966,902
Refunding Bonds, Series 1992, 5.500%, 10/01/15
2,000 South San Joaquin Irrigation District, San Joaquin County, 1/03 at 102.00 AAA 2,062,119
California, 1993 Refunding Revenue Certificates of
Participation (1987 and 1992 Project), 5.500%, 1/01/15
5,410 City of Tulare, California, 1996 Sewer Revenue Bonds, 11/06 at 102.00 AAA 5,789,348
5.750%, 11/15/21
-----------------------------------------------------------------------------------------------------------------------------------
$ 286,165 Total Investments (cost $261,295,318) - 148.5% 283,479,366
=============----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.3% 2,390,564
-------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (49.8)% (95,000,000)
-------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $190,869,930
===================================================================================================================
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.
26
Nuveen California Premium Income Municipal Fund (NCU)
Portfolio of
Investments August 31, 2002
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION PROVISIONS* RATINGS** VALUE
-----------------------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES - 4.7%
$ 4,000 California Statewide Financing Authority, Tobacco Settlement 5/12 at 100.00 A1 $ 3,942,600
Asset-Backed Bonds (Pooled Tobacco Securitization Program),
Series 2002A, 5.625%, 5/01/29
-----------------------------------------------------------------------------------------------------------------------------------
HEALTHCARE - 20.1%
5,150 California Health Facilities Financing Authority, Hospital Revenue 5/03 at 102.00 BBB+ 5,196,299
Bonds (Downey Community Hospital), Series 1993,
5.750%, 5/15/15
8,100 California Statewide Communities Development Authority, No Opt. Call AAA 8,353,368
Revenue Refunding Bonds (Sherman Oaks Project),
Series 1998A, 5.000%, 8/01/22
1,185 California Statewide Communities Development Authority, 2/03 at 102.00 A3 1,213,262
Hospital Revenue Certificates of Participation (Cedars-Sinai
Medical Center), Series 1992, 6.500%, 8/01/15
2,000 City of Loma Linda, California, Hospital Revenue Bonds (Loma 12/03 at 102.00 BB- 1,976,220
Linda University Medical Center Project), Series 1993-A,
6.000%, 12/01/06
-----------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY - 16.7%
2,000 California Statewide Communities Development Authority, 7/08 at 101.00 BBB 2,085,780
Apartment Development Revenue Refunding Bonds (Irvine
Apartment Communities, L.P.), Series 1998A, 5.250%, 5/15/25
(Mandatory put 5/15/13)
6,785 Community Redevelopment Agency of the City of Los Angeles, 6/05 at 105.00 AAA 7,565,004
California, Multifamily Housing Revenue Refunding Bonds
(Angelus Plaza Project), 1995 Series A, 7.400%, 6/15/10
3,865 City of Stanton, California, Multifamily Housing Revenue Bonds 8/07 at 102.00 AAA 4,253,355
(Continental Gardens Apartments), Series 1997, 5.625%, 8/01/29
(Alternative Minimum Tax) (Mandatory put 8/01/09)
-----------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 9.5%
2,450 California Housing Finance Agency, Single Family Mortgage 2/07 at 102.00 AAA 2,596,388
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 102.00 Aa2 1,047,540
Bonds, 1994 Series A, 6.550%, 8/01/26
1,000 California Housing Finance Agency, Home Mortgage Revenue 8/05 at 102.00 AAA 1,033,760
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 102.00 AAA 2,123,600
Bonds, 1997 Series B, 6.000%, 8/01/16 (Alternative
Minimum Tax)
980 California Rural Home Mortgage Financing Authority, Single No Opt. Call AAA 1,137,907
Family Mortgage Revenue Bonds (Mortgage-Backed Securities
Program), 1996 Series C, 7.500%, 8/01/27 (Alternative
Minimum Tax)
-----------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 12.8%
4,000 State of California, General Obligation Veterans Welfare 6/04 at 101.00 AA- 3,989,920
Bonds, Series BR, 5.300%, 12/01/29 (Alternative Minimum Tax)
3,000 Pomona Unified School District, California, General Obligation 8/11 at 103.00 AAA 3,555,240
Refunding Bonds, Series 1997-A, 6.150%, 8/01/15
3,000 San Diego Unified School District, California, 2000 General 7/10 at 100.00 AAA 3,085,560
Obligation Bonds (Election of 1998), Series B, 5.125%, 7/01/22
-----------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 49.8%
4,500 Bonita Canyon Public Facilities Financing Authority, California, 9/02 at 103.00 N/R 4,338,315
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 11/09 at 101.00 AAA 6,433,382
Revenue 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
2,400 City of Carlsbad, Assessment District No. 96-1, California, 9/02 at 101.50 N/R 2,293,080
Limited Obligation Improvement Bonds (Rancho Carillo),
5.500%, 9/02/28
27
Nuveen California Premium Income Municipal Fund (NCU) (continued)
Portfolio of Investments August 31, 2002
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION PROVISIONS* RATINGS** VALUE
-----------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED (continued)
$ 1,000 Carson Redevelopment Agency, California, Refunding Tax 10/03 at 102.00 BBB $ 1,038,200
Allocation Bonds (Redevelopment Project Area No. 2),
Series 1993, 5.875%, 10/01/09
600 Dinuba Financing Authority, California, Lease Revenue Refunding 8/12 at 102.00 AAA 609,576
Bonds, Public Works Issue 2002, 5.100%, 8/01/32
3,500 City of Livermore Redevelopment Agency, California, Tax 8/11 at 100.00 AAA 3,531,185
Allocation Revenue Bonds (Livermore Redevelopment
Project Area), Series 2001A, 5.000%, 8/01/26
2,160 Community Redevelopment Financing Authority of the 6/03 at 102.00 BB 2,127,298
Community 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 City of Poway, Community Facilities District No. 88-1, 8/08 at 102.00 N/R 1,122,450
California, Special Tax Refunding Bonds (Parkway Business
Centre), Series 1998, 6.500%, 8/15/09
1,205 Puerto Rico Highway and Transportation Authority, 7/12 at 100.00 A 1,249,645
Transportation Revenue Bonds, Series D, 5.375%, 7/01/36
5,000 Redevelopment Agency for the County of Riverside, California, 10/11 at 102.00 AAA 5,202,550
2001 Tax Allocation Bonds (Jurupa Valley Project Area),
5.150%, 10/01/21
6,200 Sacramento City Financing Authority, California, Lease Revenue No Opt. Call AA- 6,721,978
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 101.00 Baa3 1,545,930
1,000 5.800%, 9/01/27 9/08 at 101.00 Baa3 1,020,700
2,050 County of Santa Barbara, California, Certificates of 12/11 at 102.00 AAA 2,217,403
Participation, Series 2001, 5.250%, 12/01/19
2,000 City of Vista, California, Mobile Home Park Revenue Bonds 3/09 at 102.00 N/R 1,908,460
(Vista Manor Mobile Home Park Project), Series 1999A,
5.750%, 3/15/29
-----------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 6.1%
2,750 Airports Commission of the City and County of San Francisco, 5/04 at 102.00 AAA 2,991,588
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 102.00 AAA 2,082,940
California, San Francisco International Airport, Second Series
Revenue Bonds, Issue 10A, 5.700%, 5/01/26 (Alternative
Minimum Tax)
-----------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED - 12.5%
3,200 State Public Works Board of the State of California, The Trustees 10/04 at 102.00 A*** 3,587,584
of the California State University, Lease Revenue Bonds (Various
California State University Projects), 1994 Series A,
6.375%, 10/01/14 (Pre-refunded to 10/01/04)
3,500 Commonwealth of Puerto Rico, Public Improvement General 7/10 at 100.00 AAA 4,023,810
Obligation Bonds of 2000, 5.750%, 7/01/21 (Pre-refunded
to 7/01/10)
2,475 City of Torrance, California, Hospital Revenue Bonds (Little 12/05 at 100.00 AAA 2,812,961
Company of Mary Hospital), 1985 Series A, 7.100%, 12/01/15
(Pre-refunded to 12/01/05)
-----------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 10.8%
1,000 California Pollution Control Financing Authority, Pollution Control 12/02 at 102.00 AAA 1,029,940
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 102.00 Baa3 3,080,250
Refunding Revenue Bonds (Electric System Project),
6.500%, 9/01/22
4,580 Sacramento Municipal Utility District, California, Electric 8/12 at 100.00 AAA 4,889,196
Revenue Bonds, 2002 Series Q Refunding, 5.250%, 8/15/20
28
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION PROVISIONS* RATINGS** VALUE
-----------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 6.5%
$ 5,000 Culver City, California, Wastewater Facilities Refunding Revenue 9/09 at 102.00 AAA $ 5,407,299
Bonds, 1999 Series A, 5.700%, 9/01/29
-----------------------------------------------------------------------------------------------------------------------------------
$ 118,055 Total Investments (cost $118,120,494) - 149.5% 124,421,523
=============----------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 1.8%
$ 1,500 California Statewide Communities Development Authority, VMIG-1 1,500,000
============= Certificates of Participation (Northern California Retired
Officers Community), Variable Rate Demand Obligations,
1.750%, 6/01/26+
-------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 0.4% 327,314
-------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (51.7)% (43,000,000)
-------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $ 83,248,837
===================================================================================================================
* 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. Such securities are normally considered to be
equivalent to AAA rated securities.
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.
29
Nuveen California Dividend Advantage Municipal Fund (NAC)
Portfolio of
Investments August 31, 2002
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION PROVISIONS* RATINGS** VALUE
-----------------------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES - 4.5%
$ 5,000 California Statewide Communities Development Authority, 11/09 at 102.00 N/R $ 5,144,100
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 100.00 A1 2,384,025
4,500 5.375%, 6/01/41 6/11 at 100.00 A1 4,170,060
4,485 Tobacco Securitization Authority of Southern California, Tobacco 6/12 at 100.00 A1 4,523,795
Settlement Asset-Backed Bonds (San Diego County Tobacco
Asset Securitization Corporation), Senior Series 2001A,
5.250%, 6/01/27
-----------------------------------------------------------------------------------------------------------------------------------
EDUCATION AND CIVIC ORGANIZATIONS - 9.4%
3,000 Long Beach Bond Financing Authority, California, Lease 11/11 at 100.00 AAA 3,309,690
Revenue Refunding Bonds (The Aquarium of the South Pacific),
5.500%, 11/01/17
700 The Regents of the University of California, Certificates of 1/10 at 101.00 Aa2 730,583
Participation (San Diego Campus and Sacramento Projects),
2002 Series A, 5.250%, 1/01/22
6,000 The Regents of the University of California, Multiple Purpose 9/08 at 101.00 AA 6,476,340
Projects Revenue Bonds, Series K, 5.000%, 9/01/12
The Regents of the University of California, Multiple Purpose
Projects Revenue Bonds, 2002 Series O:
10,770 5.000%, 9/01/20 9/10 at 101.00 AAA 11,189,384
11,305 5.000%, 9/01/21 9/10 at 101.00 AAA 11,659,751
-----------------------------------------------------------------------------------------------------------------------------------
HEALTHCARE - 15.7%
8,400 California Health Facilities Financing Authority, Kaiser 10/08 at 101.00 A 8,798,160
Permanente 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 101.00 A3 16,058,100
(Cedars-Sinai Medical Center), Series 1999A, 6.125%, 12/01/30
6,000 California Statewide Communities Development Authority, No Opt. Call AAA 6,187,680
Revenue Refunding Bonds (Sherman Oaks Project), Series 1998A,
5.000%, 8/01/22
8,000 Central California Joint Powers Health Financing Authority, 2/10 at 101.00 BBB+ 8,263,840
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 4/09 at 101.00 BBB 10,057,845
of Hope National Medical Center), Series 1999A,
5.250%, 4/01/31
4,000 City of Upland, California, Certificates of Participation 1/04 at 102.00 A 4,151,000
(San Antonio Community Hospital), 1993 Series,
5.250%, 1/01/08
2,500 City of Whittier, California, Health Facility Revenue Bonds 6/12 at 101.00 A- 2,546,125
(Presbyterian Intercommunity Hospital), Series 2002,
5.600%, 6/01/22
-----------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY - 14.8%
15,000 California Statewide Communities Development Authority, 7/08 at 101.00 BBB 15,882,150
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+ 10,530,200
Multifamily Housing Refunding Bonds (Archstone Pelican
Point Apartments - Archstone Communities Trust), Issue 1999H,
5.300%, 6/01/29 (Mandatory put 6/01/08)
5,250 California Statewide Communities Development Authority, 8/12 at 105.00 Aaa 6,033,300
Housing Revenue Bonds (GNMA Collateralized - Crowne
Pointe Project Refunding), 2002 Series F, 6.750%, 8/20/37
5,000 County of Contra Costa, California, Multifamily Housing 6/09 at 102.00 N/R 5,009,100
Revenue Bonds (Delta View Apartments), Series 1999C,
6.750%, 12/01/30 (Alternative Minimum Tax)
30
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION PROVISIONS* RATINGS** VALUE
-----------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY (continued)
$ 15,000 Housing Authority of the County of San Bernardino, California, No Opt. Call A3 $ 15,221,550
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 - 2.2%
36,040 California Housing Finance Agency, Single Family Mortgage 2/09 at 31.14 AAA 7,837,258
Bonds II, 1999 Series D2, 0.000%, 2/01/29 (Alternative
Minimum Tax)
-----------------------------------------------------------------------------------------------------------------------------------
LONG-TERM CARE - 2.4%
8,500 Riverside County Public Financing Authority, California, 5/09 at 101.00 BBB- 8,476,200
Certificates of Participation (Air Force Village West, Inc),
5.800%, 5/15/29
-----------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 12.9%
6,435 State of California, General Obligation Bonds, Series 2002 No Opt. Call AAA 7,717,367
Refunding, 6.000%, 4/01/16
Contra Costa Community College District, California, General
Obligation Bonds, Series 2002:
3,000 4.900%, 8/01/20 8/12 at 100.00 AAA 3,091,680
3,000 5.000%, 8/01/23 8/12 at 100.00 AAA 3,050,340
18,500 Los Angeles Unified School District, California, General 7/09 at 101.00 AAA 19,141,025
Obligation Bonds (Election of 1997), 1999 Series C,
5.250%, 7/01/24
10,845 Los Angeles Unified School District, California, General 7/12 at 100.00 AAA 11,354,932
Obligation Bonds (Election of 1997), 2002 Series E,
5.000%, 7/01/19
1,750 Oakland Unified School District, Alameda County, California, 8/08 at 101.00 AAA 1,805,423
General Obligation Bonds, Series 2001, 5.125%, 8/01/21
-----------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 38.4%
8,665 Bonita Canyon Public Facilities Financing Authority, California, 9/02 at 103.00 N/R 8,353,667
Community Facilities District No. 98-1 Special Tax Bonds,
Series 1998, 5.375%, 9/01/28
Brentwood Infrastructure Financing Authority, Contra Costa
County, California, Capital Improvement Revenue Bonds, Series
2001:
1,110 5.375%, 11/01/18 11/11 at 100.00 AAA 1,205,260
1,165 5.375%, 11/01/19 11/11 at 100.00 AAA 1,257,629
2,000 Brentwood Infrastructure Financing Authority, California, 9/12 at 100.00 AAA 2,039,220
Infrastructure Revenue Refunding Bonds, Series 2002A,
5.125%, 9/02/24
3,515 Dinuba Redevelopment Agency, California, Tax Allocation 9/11 at 102.00 AAA 3,596,197
Bonds (Redevelopment Project 2 Refunding), Series 2001,
4.875%, 9/01/21
3,490 City of Fontana, California, Community Facilities District No. 2 9/08 at 102.00 AAA 3,737,999
Senior Special Tax Refunding Bonds (Village of Heritage),
1998 Series A, 5.250%, 9/01/17
3,980 Garden Grove, California, Certificates of Participation (Financing 3/12 at 101.00 AAA 4,315,872
Project), Series 2002A, 5.500%, 3/01/22
4,250 Mira Loma Area of Jurupa Community Services District, 9/08 at 102.00 AAA 4,201,380
California, 1998 Special Tax Bonds (Community Facilities
District No. 1), 4.750%, 9/01/24 (Optional put 9/01/10)
5,500 Los Angeles County, California, Certificates of Participation 9/08 at 101.00 AAA 5,475,030
(1998 Disney Parking Refunding Project), 4.750%, 3/01/23
5,000 Los Angeles County Metropolitan Transportation Authority, 7/08 at 101.00 AAA 5,038,550
California, Proposition C Sales Tax Revenue Bonds, Second
Senior Series 1998A Refunding, 5.000%, 7/01/23
10,000 Los Angeles County Public Works Financing Authority, 10/07 at 101.00 AA 10,441,200
California, Revenue Bonds (Los Angeles County Regional
Park and Open Space District), Series 1997A,
5.000%, 10/01/16
9,200 Norco Redevelopment Agency, California, Project Area No. 1 3/11 at 102.00 AAA 9,656,320
Tax Allocation Bonds, Series 2001 Refunding, 5.000%, 3/01/19
4,670 City of Oakland Joint Powers Financing Authority, California, No Opt. Call AAA 5,396,652
Lease Revenue Refunding Bonds (Oakland Convention
Centers), Series 2001, 5.500%, 10/01/14
4,000 Orange County Local Transportation Authority, California, No Opt. Call AAA 4,610,680
Measure M Sales Tax Revenue Refunding Bonds, Limited Tax
Bonds, Second Senior Series 1997A, 5.700%, 2/15/08
31
Nuveen California Dividend Advantage Municipal Fund (NAC) (continued)
Portfolio of Investments August 31, 2002
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION PROVISIONS* RATINGS** VALUE
-----------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED (continued)
$ 5,600 City of Palm Springs Financing Authority, California, Lease 11/11 at 101.00 AAA $ 5,746,776
Revenue Refunding Bonds (Convention Center Project),
Series 2001A, 5.000%, 11/01/22
8,100 Poway Redevelopment Agency, California, Tax Allocation 12/10 at 102.00 AAA 8,879,058
Refunding Bonds (Paguay Redevelopment Project),
Series 2000, 5.750%, 6/15/33
6,500 Puerto Rico Highway and Transportation Authority, 7/12 at 100.00 A 6,740,825
Transportation Revenue Bonds, Series D, 5.375%, 7/01/36
2,000 Puerto Rico Public Finance Corporation, Commonwealth 8/11 at 100.00 AAA 2,187,800
Appropriation Bonds, Series 2001A, 5.500%, 8/01/19
10,215 Riverside County Public Financing Authority, California, No Opt. Call N/R 10,928,416
Reassessment Revenue Bonds (Rancho Village Project/AD
No. 159), Junior Lien 1999 Series B, 6.000%, 9/02/07
2,500 City of Sacramento Financing Authority, California, Lease Revenue No Opt. Call AAA 2,772,125
Bonds, Series 1993A Refunding, 5.400%, 11/01/20
City and County of San Francisco, California, Certificates of
Participation (30 Van Ness Avenue Property), Series 2001A:
1,205 4.600%, 9/01/18 9/09 at 101.00 AAA 1,227,690
1,260 4.700%, 9/01/19 9/09 at 101.00 AAA 1,285,502
1,340 4.750%, 9/01/20 9/09 at 101.00 AAA 1,363,088
1,400 4.800%, 9/01/21 9/09 at 101.00 AAA 1,419,936
25,060 Redevelopment Agency of the City of San Jose, California, 8/08 at 102.00 A 25,456,199
Tax Allocation Bonds (Merged Area Redevelopment Project),
Series 1998, 5.250%, 8/01/29
-----------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 23.8%
21,150 Foothill/Eastern Transportation Corridor Agency, California, 1/10 at 101.00 BBB- 21,308,414
Toll Road Refunding Revenue Bonds, Series 1999,
5.750%, 1/15/40
8,515 Harbor Department of the City of Los Angeles, California, 8/11 at 100.00 AAA 9,092,658
Revenue 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 100.00 AAA 24,439,570
5.750%, 11/01/29 (Alternative Minimum Tax)
5,000 Airports Commission of the City and County of San Francisco, 5/06 at 101.00 AAA 5,184,100
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 101.00 AAA 24,739,696
California, San Francisco International Airport, Second Series
Revenue Bonds, Issue 25, 5.750%, 5/01/30 (Alternative
Minimum Tax)
-----------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED - 2.8%
3,600 Los Angeles Unified School District, California, General 7/10 at 100.00 AAA 4,207,464
Obligation Bonds (Election of 1997), Series 2000D,
5.625%, 7/01/14 (Pre-refunded to 7/01/10)
5,000 Commonwealth of Puerto Rico, General Obligation Public 7/10 at 100.00 AAA 5,748,300
Improvement Bonds of 2000, 5.750%, 7/01/16
(Pre-refunded to 7/01/10)
-----------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 9.1%
7,000 Department of Water and Power of Los Angeles, California, 7/11 at 100.00 AAA 7,371,000
Power System Revenue Bonds, 2001 Series A1, 5.250%, 7/01/21
8,370 Department of Water and Power of Los Angeles, California, 7/11 at 100.00 AAA 9,002,856
Power System Revenue Refunding Bonds, Series 2001-A2,
5.375%, 7/01/19
10,000 Merced Irrigation District, California, 2001 Electric System 9/05 at 102.00 Baa3 10,280,500
Refunding Revenue Bonds (Electric System Project),
6.750%, 9/01/31
5,630 Southern California Public Power Authority, Transmission Project 7/12 at 100.00 AAA 5,765,289
Revenue Bonds (Southern Transmission Project), 2002A
Subordinate Refunding Series, 4.750%, 7/01/19
32
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION PROVISIONS* RATINGS** VALUE
-----------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 11.1%
$ 11,000 California Department of Water Resources, Central Valley 12/11 at 100.00 AAA $ 11,554,180
Project Water System Revenue Bonds, Series 2001W,
5.250%, 12/01/22
14,000 Orange County Water District, California, Revenue Certificates 8/09 at 101.00 AA 14,512,959
of Participation, Series 1999A, 5.375%, 8/15/29
8,250 Pico Rivera Water Authority, California, Revenue Bonds, 12/11 at 102.00 N/R 8,309,977
2001 Series A, 6.250%, 12/01/32
5,115 Public Utilities Commission of the City and County of 11/12 at 100.00 AAA 5,400,672
San Francisco, California, Water Revenue Bonds, Series 2002A,
5.000%, 11/01/18
-----------------------------------------------------------------------------------------------------------------------------------
$ 531,610 Total Investments (cost $500,216,112) - 147.1% 525,051,709
=============----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.9% 6,769,425
-------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (49.0)% (175,000,000)
-------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $356,821,134
===================================================================================================================
* 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.
33
Nuveen California Dividend Advantage Municipal Fund 2 (NVX)
Portfolio of
Investments August 31, 2002
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION PROVISIONS* RATINGS** VALUE
-----------------------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES - 4.6%
$ 4,625 California County Tobacco Securitization Agency, Tobacco 6/12 at 100.00 A1 $ 4,573,801
Settlement Asset-Backed Bonds (Stanislaus County Tobacco
Funding Corporation), Series 2002A, 5.500%, 6/01/33
3,000 Tobacco Securitization Authority of Northern California, 6/11 at 100.00 A1 2,780,040
Tobacco Settlement Asset-Backed Bonds, Series 2001A,
5.375%, 6/01/41
2,800 Tobacco Securitization Authority of Southern California, Tobacco 6/12 at 100.00 A 2,673,944
Settlement Asset-Backed Bonds (San Diego County Tobacco
Asset Securitization Corporation), Senior Series 2001A,
5.500%, 6/01/36
-----------------------------------------------------------------------------------------------------------------------------------
EDUCATION AND CIVIC ORGANIZATIONS - 13.7%
5,000 California Educational Facilities Authority, Revenue Bonds 6/11 at 101.00 AAA 5,179,500
(Stanford University), Series Q, 5.250%, 12/01/32
15,000 California Educational Facilities Authority, Student Loan 3/08 at 102.00 Aaa 15,548,100
Revenue Bonds (California Loan Program), Series 2001A,
5.400%, 3/01/21 (Alternative Minimum Tax)
9,000 Long Beach Bond Financing Authority, California, Lease Revenue 11/11 at 101.00 AAA 9,311,310
Refunding Bonds (The Aquarium of the South Pacific),
5.250%, 11/01/30
-----------------------------------------------------------------------------------------------------------------------------------
HEALTHCARE - 14.2%
5,000 California Health Facilities Financing Authority, Kaiser 5/03 at 102.00 A 5,042,550
Permanente Revenue Bonds, 1993 Series C, 5.600%, 5/01/33
7,000 California Infrastructure and Economic Development Bank, 8/11 at 102.00 A 7,170,730
Revenue Bonds (Kaiser Hospital Assistance I-LLC), Series 2001A,
5.550%, 8/01/31
6,000 California Statewide Communities Development Authority, No Opt. Call AAA 6,187,680
Revenue Refunding Bonds (Sherman Oaks Project),
Series 1998A, 5.000%, 8/01/22
5,355 California Statewide Communities Development Authority, No Opt. Call A 5,532,465
Kaiser Permanente Revenue Bonds, Series 2002E,
4.700%, 11/01/36 (Mandatory put 6/01/09)
3,000 Central California Joint Powers Health Financing Authority, 2/10 at 101.00 BBB+ 3,098,940
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 6/11 at 101.00 A+ 2,544,150
Memorial Medical Center), Series 2001A, 5.500%, 6/01/31
1,500 City of Whittier, California, Health Facility Revenue Bonds 6/12 at 101.00 A- 1,527,675
(Presbyterian Intercommunity Hospital), Series 2002,
5.600%, 6/01/22
-----------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY - 7.0%
5,962 California Statewide Communities Development Authority, 6/11 at 102.00 AAA 6,391,741
Multifamily Housing Revenue Refunding Bonds (Claremont
Village Apartments), Series 2001D, 5.500%, 6/01/31
(Alternative Minimum Tax) (Mandatory put 6/01/16)
3,500 California Statewide Communities Development Authority, 8/12 at 105.00 Aaa 4,022,200
Housing Revenue Bonds (GNMA Collateralized - Crowne
Pointe Project Refunding), 2002 Series F, 6.750%, 8/20/37
4,650 Redevelopment Agency of the City and County of San 10/11 at 100.00 Aaa 4,863,714
Francisco, California, Multifamily Housing Revenue Bonds
(GNMA Collateralized - Kokoro Assisted Living Facility),
2001 Series A, 5.675%, 4/20/43
-----------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 2.8%
5,865 California Rural Home Mortgage Financing Authority, Single 6/11 at 102.00 AAA 6,069,982
Family Mortgage Revenue Bonds (Mortgage-Backed
Securities Program), 2001 Series A, 5.650%, 12/01/31
(Alternative Minimum Tax)
34
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION PROVISIONS* RATINGS** VALUE
-----------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 30.3%
$ 9,000 State of California, Veterans General Obligation Bonds, 6/06 at 101.00 AAA $ 9,224,370
Series BV, 5.600%, 12/01/32
3,615 Colton Joint Unified School District, San Bernardino County, 8/12 at 102.00 AAA 3,950,797
California, General Obligation Bonds, Series 2002A,
5.500%, 8/01/22
Contra Costa Community College District, California, General
Obligation Bonds, Series 2002:
3,005 5.000%, 8/01/21 8/12 at 100.00 AAA 3,098,546
3,300 5.000%, 8/01/22 8/12 at 100.00 AAA 3,378,969
8,330 Los Angeles Unified School District, California, General 7/10 at 100.00 AAA 8,675,112
Obligation Bonds (Election of 1997), Series 2000D,
5.375%, 7/01/25
10,840 Los Angeles Unified School District, California, General 7/12 at 100.00 AAA 11,349,697
Obligation Bonds (Election of 1997), 2002 Series E,
5.000%, 7/01/19
14,190 City of San Jose, California, General Obligation Bonds 9/11 at 100.00 AA+ 14,394,336
(Libraries and Parks Projects), Series 2001, 5.125%, 9/01/31
4,050 City of Santa Rosa High School District, Sonoma County, 5/11 at 101.00 AAA 4,220,505
California, General Obligation Bonds, Series 2001,
5.300%, 5/01/26
7,600 Southwestern Community College District, San Diego County, 8/11 at 101.00 AAA 7,981,140
California, General Obligation Bonds, Series 2001,
5.375%, 8/01/25
-----------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 40.9%
9,000 Anitoch Area Public Facilities Financing Authority, California, 8/11 at 100.00 AAA 9,327,060
Special Tax Bonds (Community Facilities District No.
1989-1), Series 2001, 5.250%, 8/01/25
4,000 Daly City Housing Development Finance Agency, California, 12/13 at 102.00 A- 4,127,720
Mobile Home Park Revenue Bonds (Franciscan Mobile
Home Park), Series 2002A, 5.850%, 12/15/32
4,845 City of Encinitas Public Financing Authority, California, Lease 4/08 at 102.00 AAA 4,980,515
Revenue Bonds (Acquisition Project), Series 2001A,
5.250%, 4/01/31
5,000 Industry Urban Development Agency, California, Tax Allocation 5/07 at 101.50 AAA 5,318,050
Refunding Bonds (Civic, Recreational and Industrial
Redevelopment Project No. 1), Series 2002, 5.500%, 5/01/19
8,000 Los Angeles County Metropolitan Transportation Authority, 7/08 at 101.00 AAA 8,061,680
California, Proposition C Sales Tax Revenue Bonds, Second
Senior Series 1998A Refunding, 5.000%, 7/01/23
3,300 Puerto Rico Highway and Transportation Authority, Transportation 7/12 at 100.00 A 3,422,265
Revenue Bonds, Series D, 5.375%, 7/01/36
4,400 Puerto Rico Public Finance Corporation, Commonwealth No Opt. Call BBB+ 5,073,860
Appropriation Bonds, 2002 Series E, 6.000%, 8/01/26
9,000 Redevelopment Agency for the County of Riverside, California, 10/11 at 102.00 AAA 9,286,830
2001 Tax Allocation Bonds (Jurupa Valley Project Area),
5.250%, 10/01/35
Santa Clara Valley Transportation Authority, California, Sales
Tax Revenue Bonds, Series 2001A:
16,090 5.000%, 6/01/25 6/11 at 100.00 AAA 16,242,051
15,345 5.000%, 6/01/26 6/11 at 100.00 AAA 15,479,269
3,045 Redevelopment Agency of the City of Yucaipa, California, 5/11 at 102.00 N/R 3,081,601
Mobile Home Park Revenue Bonds (Rancho del Sol and
Grandview), Series 2001A, 6.750%, 5/15/36
5,600 Community Facilities District No. 98-1, Chapman Heights, 9/09 at 102.00 N/R 5,348,672
City of Yucaipa, County of San Bernardino, California,
1998 Special Tax Bonds, 6.000%, 9/01/28
-----------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 6.2%
5,500 California Statewide Communities Development Authority, 10/11 at 100.00 Ca 1,210,495
Special Facility Revenue Bonds (United Air Lines, Inc. - Los
Angeles International Airport Cargo Projects), Series 2001,
6.250%, 10/01/35 (Alternative Minimum Tax)
3,840 Sacramento-Yolo Port District, Counties of Sacramento and 7/08 at 101.00 Baa2 3,960,269
Yolo, California, Port Facilities Refunding and Improvement
Revenue Bonds, Series 2001, 5.125%, 7/01/14
35
Nuveen California Dividend Advantage Municipal Fund 2 (NVX) (continued)
Portfolio of Investments August 31, 2002
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION PROVISIONS* RATINGS** VALUE
-----------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION (continued)
$ 6,100 Airports Commission of the City and County of San Francisco, 5/10 at 101.00 AAA $ 6,203,639
California, San Francisco International Airport, Second Series
Revenue Bonds, Issue 26A, 5.250%, 5/01/30 (Alternative
Minimum Tax)
2,000 Airports Commission of the City and County of San Francisco, 5/12 at 100.00 AAA 2,109,200
California, San Francisco International Airport, Second Series
Revenue Refunding Bonds, Issue 28A, 5.250%, 5/01/17
(Alternative Minimum Tax)
-----------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 14.9%
5,000 California Pollution Control Financing Authority, Pollution 4/11 at 102.00 AAA 5,330,700
Control Refunding Revenue Bonds (Pacific Gas and Electric
Company), 1996A Remarketed, 5.350%, 12/01/16
(Alternative Minimum Tax)
1,000 Merced Irrigation District, California, 2002 Revenue Certificates 9/05 at 103.00 Baa3 1,021,360
of Participation (Electric System Project), 6.500%, 9/01/34
26,000 Sacramento Municipal Utility District, California, Electric 8/11 at 100.00 AAA 26,195,520
Revenue Bonds, Series 2001N, 5.000%, 8/15/28
-----------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 9.5%
15,000 East Bay Municipal Utility District, Alameda and Contra Costa 6/11 at 100.00 AAA 15,131,249
Counties, California, Water System Subordinated Revenue
Bonds, Series 2001, 5.000%, 6/01/26
5,375 Public Utilities Commission of the City and County of San 11/12 at 100.00 AAA 5,634,558
Francisco, California, Water Revenue Bonds, Series 2002A,
5.000%, 11/01/19
-----------------------------------------------------------------------------------------------------------------------------------
$ 311,127 Total Investments (cost $307,649,507) - 144.1% 315,338,557
=============----------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 4.3%
$ 9,500 California Health Facilities Financing Authority, Revenue Bonds VMIG-1 9,500,000
============= (Adventist Health System West), Series 2002A, Variable Rate
Demand Obligations, 1.750%, 9/01/25+
-------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.9% 3,975,826
-------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (50.3)% (110,000,000)
-------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $218,814,383
===================================================================================================================
* 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.
36
Nuveen California Dividend Advantage Municipal Fund 3 (NZH)
Portfolio of
Investments August 31, 2002
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION PROVISIONS* RATINGS** VALUE
-----------------------------------------------------------------------------------------------------------------------------------
CAPITAL GOODS - 1.4%
$ 4,715 California Pollution Control Financing Authority, Solid Waste No Opt. Call BBB $ 4,770,496
Disposal Revenue Bonds (Waste Management Inc. Project),
Series 2002B, 4.450%, 7/01/27 (Alternative Minimum Tax)
(Mandatory put 7/01/05)
-----------------------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES - 4.4%
11,240 California County Tobacco Securitization Agency, Merced 6/12 at 100.00 A1 11,115,573
County, Tobacco Settlement Asset-Backed Bonds (Tobacco
Funding Corporation), Series 2002A, 5.500%, 6/01/33
4,200 Tobacco Securitization Authority of Southern California, Tobacco 6/12 at 100.00 A 4,010,916
Settlement Asset-Backed Bonds (San Diego County Tobacco
Asset Securitization Corporation), Senior Series 2001A,
5.500%, 6/01/36
-----------------------------------------------------------------------------------------------------------------------------------
EDUCATION AND CIVIC ORGANIZATIONS - 12.5%
9,000 California Educational Facilities Authority, Student Loan 3/08 at 102.00 Aaa 9,328,860
Revenue Bonds (California Loan Program), Series 2001A,
5.400%, 3/01/21 (Alternative Minimum Tax)
5,000 San Diego State University Foundation, California, Auxiliary 3/12 at 100.00 AAA 5,022,150
Organization Revenue Bonds, Series 2002A, 5.000%, 3/01/37
7,595 San Francisco State University Foundation Inc., California, 9/11 at 100.00 AAA 7,669,431
Auxiliary Organization Revenue Bonds (Student Housing),
Series 2001, 5.000%, 9/01/26
2,990 The Regents of the University of California, Multiple Purpose 9/08 at 101.00 AA 3,016,491
Projects Revenue Bonds, Series K, 5.000%, 9/01/23
8,720 The Regents of the University of California, Multiple Purpose 9/09 at 101.00 AAA 8,858,299
Projects Revenue Bonds, Series 2001M, 5.125%, 9/01/30
The Regents of the University of California, Research Facilities
Revenue Bonds, 2001 Series E:
3,820 5.000%, 9/01/26 9/09 at 101.00 AAA 3,843,378
5,360 5.000%, 9/01/27 9/09 at 101.00 AAA 5,403,309
-----------------------------------------------------------------------------------------------------------------------------------
HEALTHCARE - 13.0%
6,650 California Health Facilities Financing Authority, Revenue 11/08 at 101.00 AAA 6,665,029
Bonds (USCF - Stanford Healthcare), 1998 Series A,
5.000%, 11/15/31
California Health Facilities Financing Authority, Revenue
Bonds (Casa Colina Inc.), Series 2001:
4,000 6.000%, 4/01/22 4/12 at 100.00 BBB+ 4,103,800
2,000 6.125%, 4/01/32 4/12 at 100.00 BBB+ 2,049,380
10,550 California Health Facilities Financing Authority, Kaiser 5/03 at 102.00 A 10,639,781
Permanente Revenue Bonds, 1993 Series C, 5.600%, 5/01/33
9,000 California Infrastructure and Economic Development Bank, 8/11 at 102.00 A 9,219,510
Revenue Bonds (Kaiser Hospital Assistance I-LLC),
Series 2001A, 5.550%, 8/01/31
7,665 California State Communities Development Authority, 11/09 at 102.00 A+ 7,973,900
Insured Mortgage Hospital Revenue Bonds (Mission
Community Hospital), Series 2001, 5.375%, 11/01/21
1,740 Central California Joint Powers Health Financing Authority, 2/10 at 101.00 BBB+ 1,797,385
Certificates of Participation (Community Hospitals of Central
California Obligated Group Project), Series 2000,
6.000%, 2/01/30
2,500 City of Whittier, California, Health Facility Revenue Bonds 6/12 at 101.00 A- 2,546,125
(Presbyterian Intercommunity Hospital), Series 2002,
5.600%, 6/01/22
37
Nuveen California Dividend Advantage Municipal Fund 3 (NZH) (continued)
Portfolio of Investments August 31, 2002
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION PROVISIONS* RATINGS** VALUE
-----------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY - 4.2%
$ 5,250 California Statewide Communities Development Authority, 8/12 at 105.00 Aaa $ 6,033,300
Housing Revenue Bonds (GNMA Collateralized - Crowne
Pointe Project Refunding), 2002 Series F, 6.750%, 8/20/37
3,610 Housing Authority of the County of San Bernardino, California, 11/11 at 105.00 Aaa 4,157,565
Multifamily Mortgage Revenue Bonds (GNMA Collateralized -
Pacific Palms Mobile Home Park), Series 2001A, 6.700%, 12/20/41
San Jose, California, Multifamily Housing Revenue Bonds (GNMA
Mortgage-Backed Securities Program - Lenzen Housing), Series
2001B:
1,250 5.350%, 2/20/26 (Alternative Minimum Tax) 8/11 at 102.00 AAA 1,282,338
2,880 5.450%, 2/20/43 (Alternative Minimum Tax) 8/11 at 102.00 AAA 2,954,592
-----------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 2.3%
3,000 California Housing Finance Agency, Home Mortgage 2/08 at 101.50 AAA 3,084,390
Revenue Bonds, Series 1998B, 5.150%, 2/01/18
(Alternative Minimum Tax)
25,325 California Housing Finance Agency, Home Mortgage 8/11 at 30.72 AAA 4,732,989
Revenue Bonds, Series 2001T, 0.000%, 8/01/32
(Alternative Minimum Tax)
-----------------------------------------------------------------------------------------------------------------------------------
LONG-TERM CARE - 0.8%
California Health Facilities Financing Authority, Insured Senior
Living Revenue Bonds (Aldersly), 2002 Series A:
1,500 5.125%, 3/01/22 (WI, settling 9/25/02) 3/12 at 101.00 A+ 1,486,305
1,315 5.250%, 3/01/32 (WI, settling 9/25/02) 3/12 at 101.00 A+ 1,301,850
-----------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 29.7%
8,500 State of California, Veterans General Obligation Welfare 12/03 at 102.00 AA- 8,634,300
Bonds, Series 1997BH, 5.500%, 12/01/18 (Alternative
Minimum Tax)
7,165 State of California, Veterans General Obligation Bonds, 12/06 at 102.00 AA- 7,401,015
Series BJ, 5.500%, 12/01/18 (Alternative Minimum Tax)
9,335 State of California, General Obligation Bonds, Series 2002, No Opt. Call AAA 11,178,102
6.000%, 2/01/16
15,000 State of California, Various Purpose General Obligation Bonds, 11/11 at 100.00 AAA 15,103,200
Series 2001, 5.000%, 11/01/30
14,300 State of California, Veterans General Obligation Bonds, 6/07 at 101.00 AAA 14,534,234
2001 Series BZ, 5.350%, 12/01/21 (Alternative Minimum Tax)
5,000 Cupertino Union School District, Santa Clara County, California, 8/11 at 100.00 AAA 4,912,100
General Obligation Bonds, Series 2001A, 4.750%, 8/01/26
15,135 Newport-Mesa Unified School District, Orange County, 8/11 at 101.00 Aaa 14,868,927
California, General Obligation Bonds (Election of 2000),
Series 2001, 4.750%, 8/01/26
3,000 Pasadena Unified School District, Los Angeles County, 11/11 at 101.00 AAA 2,951,070
California, General Obligation Bonds (Election of 1997),
Series 2001C, 4.750%, 11/01/26
3,000 Commonwealth of Puerto Rico, Public Improvement General 7/11 at 100.00 AAA 3,050,160
Obligation Bonds, Refunding Series 2001, 5.000%, 7/01/24
5,000 Riverside Unified School District, Riverside County, California, 2/12 at 101.00 AAA 5,049,550
General Obligation Bonds, Series 2002A, 5.000%, 2/01/27
10,810 San Diego Unified School District, San Diego County, California, 7/11 at 102.00 AAA 10,921,992
General Obligation Bonds (Election of 1998), Series 2001C,
5.000%, 7/01/26
4,000 San Diego Unified School District, San Diego County, California, 7/12 at 101.00 AAA 4,263,520
General Obligation Bonds (Election of 1998), Series 2002D,
5.250%, 7/01/21 (WI, settling 9/12/02)
-----------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 50.5%
4,000 Beaumont Financing Authority, California, Local Agency Revenue 9/12 at 102.00 N/R 4,003,240
Bonds, Series 2002A, 6.750%, 9/01/25
Brentwood Infrastructure Financing Authority, Contra Costa
County, California, Capital Improvement Revenue Bonds, Series
2001:
7,135 5.000%, 11/01/25 11/11 at 100.00 AAA 7,205,066
6,955 5.000%, 11/01/31 11/11 at 100.00 AAA 6,997,773
4,510 State Public Works Board of the State of California, Lease 12/11 at 102.00 AAA 4,527,003
Revenue Bonds (Department of Mental Health, Hospital
Addition), Series 2001A, 5.000%, 12/01/26
38
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION PROVISIONS* RATINGS** VALUE
-----------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED (continued)
$ 15,000 State Public Works Board of the State of California, Lease 3/12 at 100.00 AAA $ 15,103,800
Revenue Bonds (Department of General Services),
Series 2002B, 5.000%, 3/01/27
1,270 Coalinga Public Financing Authority, California, Local No Opt. Call AAA 1,514,907
Obligation Revenue Refunding Bonds, Senior Lien Series A,
6.000%, 9/15/18
2,000 Daly City Housing Development Finance Agency, California, 12/13 at 102.00 A- 2,065,200
Mobile Home Park Revenue Bonds (Franciscan Mobile Home
Park), Series 2002A, 5.800%, 12/15/25
6,755 Dinuba Redevelopment Agency, California, Tax Allocation 9/11 at 102.00 AAA 6,774,860
Bonds (Redevelopment Project 2 Refunding), Series 2001,
5.000%, 9/01/31
1,000 Fullerton, California, Community Facilities District No. 001 9/12 at 100.00 N/R 1,009,160
Special Tax Bonds (Amerige Heights), Series 2002,
6.100%, 9/01/22
7,945 La Quinta Redevelopment Agency, California, Project Area 9/11 at 102.00 AAA 8,068,783
No. 1 Tax Allocation Bonds, Series 2001, 5.100%, 9/01/31
5,425 Lodi, California, Certificates of Participation (Public Improvement 10/12 at 100.00 AAA 5,473,988
Financing Project), Series 2002, 5.000%, 10/01/26
14,410 Los Angeles Unified School District, California, Certificates 10/11 at 100.00 AAA 14,487,814
of Participation (Administration Building Project), Series 2001B,
5.000%, 10/01/31
13,515 Norco Redevelopment Agency, California, Project Area No. 1 3/11 at 102.00 AAA 13,756,783
Tax Allocation Bonds, Series 2001 Refunding,
5.125%, 3/01/30
4,520 Ontario Redevelopment Financing Authority, California, Lease 8/11 at 101.00 AAA 4,574,873
Revenue Bonds (Capital Projects), Series 2001,
5.000%, 8/01/24
11,165 Palm Desert Financing Authority, California, Tax Allocation 4/12 at 102.00 AAA 11,355,252
Revenue Bonds (Project Area No. 1), Series 2002 Refunding,
5.100%, 4/01/30
5,000 Pomona Public Financing Authority, California, Revenue Bonds 2/11 at 100.00 AAA 5,028,150
(Merged Redevelopment Projects Refunding), Series 2001AD,
5.000%, 2/01/27
2,925 Pomona Valley Educational Joint Power Authority, California, 8/09 at 102.00 AAA 2,924,883
Lease Revenue Bonds (Pomona Unified School District
Financing), Series 2001, 4.875%, 8/01/26
6,500 Puerto Rico Highway and Transportation Authority, Transportation 7/12 at 100.00 A 6,740,825
Revenue Bonds, Series D, 5.375%, 7/01/36
4,400 Puerto Rico Public Finance Corporation, Commonwealth No Opt. Call BBB+ 5,073,860
Appropriation Bonds, 2002 Series E, 6.000%, 8/01/26
2,385 City of San Buenaventura Public Facilities Financing Authority, 2/11 at 101.00 AAA 2,358,050
California, 2001 Certificates of Participation, Series C,
4.750%, 2/01/24
14,505 City of San Diego Redevelopment Agency, California, 9/11 at 101.00 AAA 14,658,028
Subordinate Tax Allocation Bonds (Centre City Redevelopment
Project), Series 2001A, 5.000%, 9/01/26
5,805 City and County of San Francisco, California, Certificates of 9/09 at 101.00 AAA 5,836,347
Participation (30 Van Ness Avenue Property), Series 2001A,
5.000%, 9/01/31
8,725 San Francisco Bay Area Rapid Transit District, California, Sales 7/11 at 100.00 AAA 8,801,955
Tax Revenue Bonds, Series 2001, 5.000%, 7/01/26
10,000 San Diego Redevelopment Agency, California, Merged Area 8/10 at 101.00 AAA 10,080,500
Redevelopment Project Tax Allocation Bonds, Series 2002,
5.000%, 8/01/27
2,115 San Marcos Public Facilities Authority, California, Special Tax 9/07 at 102.00 N/R 2,127,225
Revenue Bonds, Series 2002, 6.300%, 9/01/20
1,595 Santa Clara Valley Transportation Authority, California, Sales 6/11 at 100.00 AAA 1,629,468
Tax Revenue Bonds, Series 2001A, 5.000%, 6/01/22
2,500 Yucaipa-Calimesa Joint Union School District, San Bernardino 10/11 at 100.00 AAA 2,518,950
County, California, General Obligation Bonds, Series 2001A
Refunding, 5.000%, 10/01/26
39
Nuveen California Dividend Advantage Municipal Fund 3 (NZH) (continued)
Portfolio of Investments August 31, 2002
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION PROVISIONS* RATINGS** VALUE
-----------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 5.7%
$ 1,500 Port of Oakland, California, Refunding Revenue Bonds, 11/07 at 102.00 AAA $ 1,615,605
1997 Series I, 5.600%, 11/01/19
1,420 Airports Commission of the City and County of San Francisco, 5/09 at 101.00 AAA 1,438,744
California, San Francisco International Airport, Second Series
Revenue Bonds, Issue 23B, 5.125%, 5/01/30
6,000 Airports Commission of the City and County of San Francisco, 5/10 at 101.00 AAA 6,029,280
California, San Francisco International Airport, Second Series
Revenue Bonds, Issue 26B, 5.000%, 5/01/30
10,350 Airports Commission of the City and County of San Francisco, 5/11 at 100.00 AAA 10,547,685
California, San Francisco International Airport, Second Series
Revenue Refunding Bonds, Issue 27A, 5.250%, 5/01/26
(Alternative Minimum Tax)
-----------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 7.8%
15,000 Anaheim Public Financing Authority, California, Revenue Bonds 10/12 at 100.00 AAA 15,099,750
(Electric System Distribution Facilities), Series 2002A,
5.000%, 10/01/31
1,600 Merced Irrigation District, California, 2002 Revenue Certificates 9/05 at 103.00 Baa3 1,634,176
of Participation (Electric System Project), 6.500%, 9/01/34
7,790 Modesto Irrigation District, California, Certificates of 1/12 at 100.00 AAA 7,832,767
Participation (Capital Improvements), Series 2001A,
5.000%, 7/01/31
2,250 Salinas Valley Solid Waste Authority, California, Revenue 8/12 at 100.00 AAA 2,278,013
Bonds, Series 2002, 5.125%, 8/01/22 (Alternative Minimum Tax)
-----------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 15.9%
7,000 Carmichael Water District, Sacramento County, California, 9/09 at 102.00 AAA 7,100,800
1999 Water Revenue Certificates of Participation,
5.125%, 9/01/29
6,900 Contra Costa Water District, Contra Costa County, California, 10/11 at 100.00 AAA 6,459,021
Water Revenue Refunding Bonds, Series K, 4.500%, 10/01/31
Department of Water and Power of the City of Los Angeles,
California, Waterworks Revenue Bonds, Series 2001A Refunding:
18,000 5.125%, 7/01/41 7/11 at 100.00 AA 18,124,560
12,000 5.125%, 7/01/41 7/11 at 100.00 AAA 12,117,239
7,000 The Metropolitan Water District of Southern California, Water 1/08 at 101.00 AA 7,002,939
Revenue Bonds, 1997 Authorization, Series A, 5.000%, 7/01/37
2,475 The Metropolitan Water District of Southern California, 7/08 at 101.00 AA 2,473,267
Water Revenue Refunding Bonds, 1998 Series A, 4.750%, 7/01/22
1,600 Sunnyvale Financing Authority, California, Water and 10/11 at 100.00 AAA 1,614,479
Wastewater Revenue Bonds, Series 2001, 5.000%, 10/01/26
-----------------------------------------------------------------------------------------------------------------------------------
$ 524,065 Total Investments (cost $503,339,552) - 148.2% 512,000,380
=============----------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 2.3%
$ 8,000 California Statewide Communities Development Authority, VMIG-1 8,000,000
============= Certificates of Participation (Northern California Retired
Officers Community), Variable Rate Demand Obligations,
1.750%, 6/01/26+
-------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 3.6% 12,469,581
-------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (54.1)% (187,000,000)
-------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $345,469,961
===================================================================================================================
* 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.
(WI) Security purchased on a when-issued basis.
+ 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.
40
Nuveen Insured California Dividend Advantage Municipal Fund (NKL)
Portfolio of
Investments August 31, 2002
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION PROVISIONS* RATINGS** VALUE
-----------------------------------------------------------------------------------------------------------------------------------
EDUCATION AND CIVIC ORGANIZATIONS - 10.1%
$ 3,070 California Educational Facilities Authority, Revenue Bonds 3/09 at 101.00 Aa3 $ 3,252,726
(Claremont University Center), Series 1999B, 5.250%, 3/01/18
1,675 California Educational Facilities Authority, Revenue Bonds 10/12 at 100.00 A2 1,719,136
(University of San Diego), Series 2002A, 5.250%, 10/01/30
9,000 Trustees of the California State University, Systemwide 11/12 at 100.00 AAA 9,178,110
Revenue Bonds, Series 2002A, 5.125%, 11/01/26
9,000 The Regents of the University of California, Multiple Purpose 9/08 at 101.00 AA 9,229,410
Project Revenue Bonds, Series K, 5.300%, 9/01/30
-----------------------------------------------------------------------------------------------------------------------------------
HEALTHCARE - 5.0%
5,000 ABAG Financing Authority for Nonprofit Corporations, 4/12 at 100.00 A+ 5,178,650
California, Insured Revenue Bonds (Sansum-Santa Barbara
Medical Foundation Clinic), Series 2002A, 5.600%, 4/01/26
4,000 California Statewide Communities Development Authority, No Opt. Call AAA 4,125,120
Revenue Refunding Bonds (Sherman Oaks Project),
Series 1998A, 5.000%, 8/01/22
2,145 California Statewide Communities Development Authority, No Opt. Call A 2,216,085
Kaiser Permanente Revenue Bonds, Series 2002E,
4.700%, 11/01/36 (Mandatory put 6/01/09)
-----------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY - 0.9%
1,905 City of Los Angeles, California, Multifamily Housing Revenue 7/11 at 102.00 AAA 1,998,135
Bonds (GNMA Mortgage-Backed Securities Program - Park
Plaza West Senior Apartments Project), Series 2001B,
5.300%, 1/20/21 (Alternative Minimum Tax)
-----------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 5.0%
11,500 California Housing Finance Agency, Home Mortgage Revenue 2/09 at 101.50 AAA 11,655,710
Bonds, Series 1998E, 5.250%, 2/01/33 (Alternative
Minimum Tax)
-----------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 41.4%
5,920 Cajon Valley Union School District, San Diego County, 8/10 at 102.00 AAA 6,013,654
California, General Obligation Bonds, Series 2002B,
5.125%, 8/01/32
9,000 State of California, General Obligation Bonds, Series 2002 2/12 at 100.00 AAA 9,192,960
Refunding, 5.000%, 2/01/22
1,500 Centinela Valley Union High School District, Los Angeles No Opt. Call AAA 1,595,355
County, California, General Obligation Bonds, Series 2002A,
5.250%, 2/01/26
2,500 Chaffee Joint Union High School District, San Bernardino 5/12 at 101.00 AAA 2,524,150
County, California, General Obligation Bonds (Election of 1998),
Series 2002C, 5.000%, 5/01/27
10,000 Fremont Unified School District, Alameda County, California, 8/12 at 101.00 AAA 10,112,900
General Obligation Bonds, Series 2002A, 5.000%, 8/01/25
2,070 Fresno Unified School District, Fresno County, California, 8/10 at 102.00 AAA 2,115,147
General Obligation Bonds (Election of 1995), Series 2002G,
5.125%, 8/01/26
Fresno Unified School District, Fresno County, California,
General Obligation Bonds (Election of 2001), Series 2002B:
1,135 5.125%, 8/01/23 8/10 at 102.00 AAA 1,168,766
1,190 5.125%, 8/01/24 8/10 at 102.00 AAA 1,220,666
1,245 5.125%, 8/01/25 8/10 at 102.00 AAA 1,273,137
1,255 5.125%, 8/01/26 8/10 at 102.00 AAA 1,282,372
41
Nuveen Insured California Dividend Advantage Municipal Fund (NKL) (continued)
Portfolio of Investments August 31, 2002
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION PROVISIONS* RATINGS** VALUE
-----------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL (continued)
$ 6,805 Long Beach Unified School District, Los Angeles County, 8/10 at 101.00 Aaa $ 6,846,102
California, General Obligation Bonds (Election of 1999),
Series 2002D, 5.000%, 8/01/31
5,000 Los Angeles Unified School District, California, General 7/12 at 100.00 AAA 5,096,400
Obligation Bonds (Election of 1997), 2002 Series E,
5.125%, 1/01/27
7,000 Los Gatos Joint Union High School District, California, 6/12 at 101.00 AAA 7,067,340
General Obligation Bonds (Election of 1998), Series 2002C,
5.000%, 6/01/27
7,355 Mount San Antonio Community College District, Los Angeles 5/12 at 101.00 AAA 7,426,049
County, California, General Obligation Bonds, Series 2002A,
5.000%, 5/01/27
2,500 Oakland Unified School District, Alameda County, California, 8/12 at 100.00 AAA 2,649,625
General Obligation Bonds, Series 2002, 5.250%, 8/01/21
3,300 Peralta Community College District, Alameda County, 8/09 at 102.00 AAA 3,319,932
California, General Obligation Bonds (Election of 2000),
Series A, 5.000%, 8/01/31
3,250 San Diego Unified School District, San Diego County, 7/11 at 102.00 AAA 3,333,233
California, General Obligation Bonds (Election of 1998),
Series 2001C, 5.000%, 7/01/22
4,000 San Diego Unified School District, San Diego County, 7/12 at 101.00 AAA 4,293,280
California, General Obligation Bonds (Election of 1998),
Series 2002D, 5.250%, 7/01/20 (WI, settling 9/12/02)
3,500 San Mateo County Community College District, California, 9/12 at 100.00 AAA 3,534,300
General Obligation Bonds, Series 2002A, 5.000%, 9/01/26
2,980 Santa Clarita Community College District, Los Angeles 8/11 at 101.00 AAA 3,037,931
County, California, General Obligation Bonds, Series 2002,
5.125%, 8/01/26
2,460 Vacaville Unified School District, Solano County, California, 8/11 at 101.00 AAA 2,483,862
General Obligation Bonds, Series 2002, 5.000%, 8/01/26
10,000 Vista Unified School District, San Diego County, California, 8/12 at 100.00 AAA 10,167,800
General Obligation Bonds, Series 2002A, 5.000%, 8/01/23
-----------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 48.0%
6,895 Brea Olinda Unified School District, Orange County, California, 8/11 at 101.00 AAA 7,029,039
Certificates of Participation, Series 2002A Refunding,
5.125%, 8/01/26
6,000 Chula Vista, California, Certificates of Participation, 8/12 at 101.00 AAA 6,050,760
Series 2002, 5.000%, 8/01/29
3,145 Culver City Redevelopment Agency, California, Redevelopment 5/11 at 101.00 AAA 3,207,271
Project Tax Allocation Bonds, Series 2002A, 5.125%, 11/01/25
1,020 Desert Sands Unified School District, Riverside County, 3/12 at 101.00 AAA 1,061,708
California, Certificates of Participation, Series 2002 Refunding,
5.000%, 3/01/20
8,720 City of El Monte, California, Certificates of Participation 1/11 at 100.00 AAA 8,931,373
(Department of Public Services Facility Phase II), Senior Lien
Series 2001, 5.000%, 1/01/21
6,615 Inglewood Redevelopment Agency, California, Tax Allocation No Opt. Call AAA 7,051,524
Refunding Bonds (Merged Redevelopment Project),
Series 1998A, 5.250%, 5/01/23
5,500 La Quinta Redevelopment Agency, California, Project Area 9/11 at 102.00 AAA 5,585,690
No. 1 Tax Allocation Bonds, Series 2001, 5.100%, 9/01/31
La Quinta Redevelopment Agency, California, Project Area
No. 1 Tax Allocation Bonds, Series 2002:
3,400 5.000%, 9/01/22 9/12 at 102.00 AAA 3,494,316
6,500 5.125%, 9/01/32 9/12 at 102.00 AAA 6,618,495
7,000 City of Los Angeles, California, Certificates of Participation 4/12 at 100.00 AAA 7,197,610
(Real Property Acquisition Program), Series 2002,
5.200%, 4/01/27
42
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION PROVISIONS* RATINGS** VALUE
-----------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED (continued)
$ 3,000 Los Angeles Unified School District, California, Certificates of 10/11 at 100.00 AAA $ 3,016,200
Participation (Administration Building Project), Series 2001B,
5.000%, 10/01/31
4,250 Los Angeles County Metropolitan Transportation Authority, 7/08 at 101.00 AAA 4,282,768
California, Proposition C Sales Tax Revenue Bonds, Second
Senior Series 1998A Refunding, 5.000%, 7/01/23
12,605 Los Angeles County Metropolitan Transportation Authority, 7/11 at 101.00 AAA 12,667,395
California, Proposition A First Tier Senior Sales Tax Revenue
Bonds, Series 2001A, 5.000%, 7/01/31
8,470 Ontario Redevelopment Financing Authority, California, Lease 8/11 at 101.00 AAA 8,716,477
Revenue Bonds (Capital Projects), Series 2001, 5.200%, 8/01/29
5,000 Palm Desert Financing Authority, California, Tax Allocation 4/12 at 102.00 AAA 5,059,050
Revenue Bonds (Project Area No. 1), Series 2002 Refunding,
5.000%, 4/01/25
6,000 Sacramento City Financing Authority, California, Revenue Bonds 12/12 at 100.00 AAA 6,049,860
(City Hall and Redevelopment Projects), 2002 Series A,
5.000%, 12/01/28
3,175 City of San Buenaventura Public Facilities Financing Authority, 2/11 at 101.00 AAA 3,286,982
California, 2001 Certificates of Participation, Series C,
5.250%, 2/01/31
5,095 San Francisco Bay Area Rapid Transit District, California, 7/11 at 100.00 AAA 5,162,560
Sales Tax Revenue Bonds, Series 2001, 5.125%, 7/01/36
4,000 City of San Jose Financing Authority, California, Lease Revenue 9/11 at 100.00 AAA 4,175,320
Bonds (Convention Center Project Refunding), Series 2001F,
5.000%, 9/01/19
2,160 Temecula Redevelopment Agency, California, Tax Allocation 8/08 at 102.00 AAA 2,187,670
Revenue Bonds (Temecula Redevelopment Project No. 1),
Series 2002, 5.125%, 8/01/27
-----------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 24.8%
Anaheim Public Financing Authority, California, Revenue Bonds
(Electric System Distribution Facilities), Series 2002A:
9,000 5.000%, 10/01/27 10/12 at 100.00 AAA 9,077,670
20,000 5.000%, 10/01/31 10/12 at 100.00 AAA 20,133,000
10,000 California Pollution Control Financing Authority, Pollution Control 4/11 at 102.00 AAA 10,661,400
Refunding Revenue Bonds (Pacific Gas and Electric Company),
Series 1996A Remarketed, 5.350%, 12/01/16
(Alternative Minimum Tax)
6,000 Northern California Power Agency, Hydroelectric Project 7/08 at 101.00 AAA 6,125,700
Number One Revenue Bonds, 1998 Refunding Series A,
5.200%, 7/01/32
5,500 Sacramento Municipal Utility District, California, Electric 8/11 at 100.00 AAA 5,541,360
Revenue Bonds, Series 2001N, 5.000%, 8/15/28
5,630 Southern California Public Power Authority, Transmission 7/12 at 100.00 AAA 5,765,289
Project Revenue Bonds (Southern Transmission Project),
2002A Subordinate Refunding Series, 4.750%, 7/01/19
-----------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 15.6%
3,000 State of California Department of Water Resources, Water 12/12 at 100.00 AAA 3,095,550
System Revenue Bonds (Central Valley Project), Series X,
5.150%, 12/01/23
9,000 Eastern Municipal Water District, California, Water and 7/11 at 100.00 AAA 9,053,730
Sewer Revenue Certificates of Participation, Series 2001B,
5.000%, 7/01/30
750 Livermore-Amador Valley Water Management Agency, California, 8/11 at 100.00 AAA 754,530
Sewer Revenue Bonds, Series A, 5.000%, 8/01/31
9,000 Department of Water and Power of the City of Los Angeles, 7/11 at 100.00 AAA 9,087,930
California, Waterworks Revenue Bonds, Series 2001A
Refunding, 5.125%, 7/01/41
43
Nuveen Insured California Dividend Advantage Municipal Fund (NKL) (continued)
Portfolio of Investments August 31, 2002
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION PROVISIONS* RATINGS** VALUE
-----------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER (continued)
$ 6,000 City of Los Angeles, California, Wastewater System Revenue 6/12 at 100.00 AAA $ 6,036,840
Bonds, Series 2002A Refunding, 5.000%, 6/01/32
4,500 The Metropolitan Water District of Southern California, Water 1/08 at 101.00 AAA 4,525,785
Revenue Bonds, 1997 Authorization, Series A, 5.000%, 7/01/30
2,000 Pico Rivera Water Authority, California, Water System Project No Opt. Call AAA 2,256,560
Revenue Bonds, Series 1999A Refunding, 5.500%, 5/01/19
1,110 Santa Clara Valley Water District, California, Water Utility 6/10 at 100.00 AAA 1,124,796
System Revenue Bonds, Series 2000A, 5.125%, 6/01/31
-----------------------------------------------------------------------------------------------------------------------------------
$ 341,300 Total Investments (cost $334,707,539) - 150.8% 348,380,251
=============----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 0.3% 681,960
-------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (51.1)% (118,000,000)
-------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $231,062,211
===================================================================================================================
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.
(WI) Security purchased on a when-issued basis.
See accompanying notes to financial statements.
44
Statement of
Assets and Liabilities August 31, 2002
INSURED INSURED CALIFORNIA
CALIFORNIA CALIFORNIA PREMIUM
PREMIUM INCOME PREMIUM INCOME 2 INCOME
(NPC) (NCL) (NCU)
-----------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments in municipal securities, at market value $146,796,087 $283,479,366 $124,421,523
Temporary investments in short-term securities, at amortized cost,
which approximates market value 5,000,000 -- 1,500,000
Cash -- -- --
Receivables:
Interest 2,127,586 4,291,828 1,747,130
Investments sold -- 135,000 82,400
Other assets 10,026 28,237 2,343
-----------------------------------------------------------------------------------------------------------------------------------
Total assets 153,933,699 287,934,431 127,753,396
-----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Cash overdraft 4,151,599 877,342 931,235
Payable for investments purchased -- -- --
Accrued expenses:
Management fees 81,413 154,633 69,315
Organization and offering costs -- -- --
Other 90,446 117,104 87,387
Preferred share dividends payable 6,778 10,666 9,540
Common share dividends payable 466,820 904,756 407,082
-----------------------------------------------------------------------------------------------------------------------------------
Total liabilities 4,797,056 2,064,501 1,504,559
-----------------------------------------------------------------------------------------------------------------------------------
Preferred shares, at liquidation value 45,000,000 95,000,000 43,000,000
-----------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares $104,136,643 $190,869,930 $ 83,248,837
===================================================================================================================================
Common shares outstanding 6,438,911 12,653,932 5,774,216
===================================================================================================================================
Net asset value per Common share outstanding (net assets applicable to Common
shares, divided by Common shares outstanding) $ 16.17 $ 15.08 $ 14.42
===================================================================================================================================
NET ASSETS APPLICABLE TO COMMON SHARES CONSIST OF:
-----------------------------------------------------------------------------------------------------------------------------------
Common shares, $.01 par value per share $ 64,389 $ 126,539 $ 57,742
Paid-in surplus 89,092,270 175,377,016 80,181,422
Undistributed net investment income 1,830,679 1,761,555 830,638
Accumulated net realized gain (loss) from investments 334,001 (8,579,228) (4,121,994)
Net unrealized appreciation of investments 12,815,304 22,184,048 6,301,029
-----------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares $104,136,643 $190,869,930 $ 83,248,837
===================================================================================================================================
Authorized shares:
Common 200,000,000 200,000,000 Unlimited
Preferred 1,000,000 1,000,000 Unlimited
===================================================================================================================================
See accompanying notes to financial statements.
45
Statement of
Assets and Liabilities August 31, 2002 (continued)
INSURED
CALIFORNIA CALIFORNIA CALIFORNIA CALIFORNIA
DIVIDEND DIVIDEND DIVIDEND DIVIDEND
ADVANTAGE ADVANTAGE 2 ADVANTAGE 3 ADVANTAGE
(NAC) (NVX) (NZH) (NKL)
------------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments in municipal securities, at market value $525,051,709 $315,338,557 $512,000,380 $348,380,251
Temporary investments in short-term securities, at amortized cost,
which approximates market value -- 9,500,000 8,000,000 --
Cash 44,119 832,889 88,647 1,969,474
Receivables:
Interest 7,083,975 4,416,680 8,329,345 4,717,200
Investments sold 1,710,000 -- 14,787,354 --
Other assets 33,620 17,274 6,180 14,895
------------------------------------------------------------------------------------------------------------------------------------
Total assets 533,923,423 330,105,400 543,211,906 355,081,820
------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Cash overdraft -- -- -- --
Payable for investments purchased -- -- 8,558,084 4,244,880
Accrued expenses:
Management fees 149,577 94,202 149,508 99,562
Organization and offering costs -- 4,542 180,296 461,960
Other 207,010 91,017 95,274 34,794
Preferred share dividends payable 24,920 21,538 22,659 18,671
Common share dividends payable 1,720,782 1,079,718 1,736,124 1,159,742
------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 2,102,289 1,291,017 10,741,945 6,019,609
------------------------------------------------------------------------------------------------------------------------------------
Preferred shares, at liquidation value 175,000,000 110,000,000 187,000,000 118,000,000
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares $356,821,134 $218,814,383 $345,469,961 $231,062,211
====================================================================================================================================
Common shares outstanding 23,412,013 14,790,660 24,112,833 15,259,759
====================================================================================================================================
Net asset value per Common share outstanding
(net assets applicable to Common
shares, divided by Common
shares outstanding) $ 15.24 $ 14.79 $ 14.33 $ 15.14
====================================================================================================================================
NET ASSETS APPLICABLE TO COMMON SHARES CONSIST OF:
------------------------------------------------------------------------------------------------------------------------------------
Common shares, $.01 par value per share $ 234,120 $ 147,907 $ 241,128 $ 152,598
Paid-in surplus 332,500,716 210,010,181 342,317,925 216,624,409
Undistributed net investment income 2,840,186 1,221,035 718,939 125,858
Accumulated net realized gain (loss) from investments (3,589,485) (253,790) (6,468,859) 486,634
Net unrealized appreciation of investments 24,835,597 7,689,050 8,660,828 13,672,712
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares $356,821,134 $218,814,383 $345,469,961 $231,062,211
====================================================================================================================================
Authorized shares:
Common Unlimited Unlimited Unlimited Unlimited
Preferred Unlimited Unlimited Unlimited Unlimited
====================================================================================================================================
See accompanying notes to financial statements.
46
Statement of
Operations Year Ended August 31, 2002
INSURED INSURED CALIFORNIA
CALIFORNIA CALIFORNIA PREMIUM
PREMIUM INCOME PREMIUM INCOME 2 INCOME
(NPC) (NCL) (NCU)
------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME $ 7,933,884 $14,988,317 $6,751,699
------------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Management fees 946,370 1,803,205 805,740
Preferred shares - auction fees 112,500 237,500 107,500
Preferred shares - dividend disbursing agent fees 10,000 20,000 10,000
Shareholders' servicing agent fees and expenses 16,527 26,861 13,661
Custodian's fees and expenses 42,442 68,593 33,800
Directors'/Trustees' fees and expenses 1,411 2,821 1,616
Professional fees 12,330 14,753 9,876
Shareholders' reports - printing and mailing expenses 15,411 28,180 13,522
Stock exchange listing fees 15,577 21,803 562
Investor relations expense 18,443 37,957 16,946
Portfolio insurance expense 13,194 4,643 --
Other expenses 14,193 20,411 12,135
------------------------------------------------------------------------------------------------------------------------------------
Total expenses before custodian fee credit and expense reimbursement 1,218,398 2,286,727 1,025,358
Custodian fee credit (13,577) (14,400) (9,167)
Expense reimbursement -- -- --
------------------------------------------------------------------------------------------------------------------------------------
Net expenses 1,204,821 2,272,327 1,016,191
------------------------------------------------------------------------------------------------------------------------------------
Net investment income 6,729,063 12,715,990 5,735,508
------------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENTS
Net realized gain (loss) from investments 2,870,032 92,173 709,477
Change in net unrealized appreciation
(depreciation) of investments (2,620,683) (194,559) 10,347
------------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) from investments 249,349 (102,386) 719,824
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS
From net investment income (578,229) (1,211,432) (583,093)
------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets applicable to Common shares from operations $ 6,400,183 $11,402,172 $5,872,239
====================================================================================================================================
See accompanying notes to financial statements.
47
Statement of
Operations Year Ended August 31, 2002 (continued)
INSURED
CALIFORNIA CALIFORNIA CALIFORNIA CALIFORNIA
DIVIDEND DIVIDEND DIVIDEND DIVIDEND
ADVANTAGE ADVANTAGE 2 ADVANTAGE 3 ADVANTAGE
(NAC) (NVX) (NZH)* (NKL)**
------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME $27,477,386 $17,223,513 $22,182,836 $ 5,741,381
------------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Management fees 3,300,757 2,079,849 2,904,005 815,991
Preferred shares - auction fees 437,500 275,000 370,158 86,479
Preferred shares - dividend disbursing agent fees 20,000 20,000 15,834 5,863
Shareholders' servicing agent fees and expenses 10,930 5,725 4,387 2,423
Custodian's fees and expenses 140,513 88,165 147,261 102,480
Directors'/Trustees' fees and expenses 5,065 3,547 6,497 2,151
Professional fees 19,901 8,733 16,683 8,156
Shareholders' reports - printing and mailing expenses 34,985 26,164 36,622 10,075
Stock exchange listing fees 21,818 1,435 2,338 --
Investor relations expense 55,453 19,992 30,139 --
Portfolio insurance expense -- -- -- --
Other expenses 28,079 25,923 15,658 1,214
------------------------------------------------------------------------------------------------------------------------------------
Total expenses before custodian fee credit and expense reimbursement 4,075,001 2,554,533 3,549,582
1,034,832
Custodian fee credit (16,406) (18,702) (38,316) (81,515)
Expense reimbursement (1,563,125) (975,827) (1,368,392) (382,390)
------------------------------------------------------------------------------------------------------------------------------------
Net expenses 2,495,470 1,560,004 2,142,874 570,927
------------------------------------------------------------------------------------------------------------------------------------
Net investment income 24,981,916 15,663,509 20,039,962 5,170,454
------------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENTS
Net realized gain (loss) from investments 3,991,908 351,147 (6,468,859) 486,634
Change in net unrealized appreciation
(depreciation) of investments (3,853,349) (6,268,122) 8,660,828 13,672,712
------------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) from investments 138,559 (5,916,975) 2,191,969 14,159,346
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS
From net investment income (2,424,510) (1,578,722) (1,962,036) (406,088)
------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets applicable to Common shares
from operations $22,695,965 $ 8,167,812 $20,269,895 $18,923,712
====================================================================================================================================
* For the period September 25, 2001 (commencement of operations) through
August 31, 2002.
** For the period March 27, 2002 (commencement of operations) through August
31, 2002.
See accompanying notes to financial statements.
48
Statement of
Changes in Net Assets
INSURED CALIFORNIA INSURED CALIFORNIA CALIFORNIA PREMIUM
PREMIUM INCOME (NPC) PREMIUM INCOME 2 (NCL) INCOME (NCU)
---------------------------- ------------------------------ ---------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
8/31/02 8/31/01 8/31/02 8/31/01 8/31/02 8/31/01
------------------------------------------------------------------------------------------------------------------------------------
OPERATIONS
Net investment income $ 6,729,063 $ 6,701,784 $ 12,715,990 $ 12,730,709 $ 5,735,508 $ 5,776,782
Net realized gain (loss)
from investments 2,870,032 (3,088) 92,173 (518,300) 709,477 727,947
Change in net unrealized
appreciation (depreciation)
of investments (2,620,683) 6,344,071 (194,559) 12,002,378 10,347 4,435,492
Distributions to Preferred
Shareholders from
and in excess of net
investment income (578,229) (1,375,685) (1,211,432) (2,765,748) (583,093) (1,321,933)
------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets
applicable to Common
shares from operations 6,400,183 11,667,082 11,402,172 21,449,039 5,872,239 9,618,288
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS
From and in excess of net
investment income (5,538,554) (5,501,796) (10,503,880) (9,845,915) (4,728,811) (4,535,399)
------------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Common shares:
Net proceeds from sale of shares -- -- -- -- -- --
Net proceeds from shares issued
to shareholders due to
reinvestment of distributions 207,189 -- 338,627 53,134 38,176 106,665
Preferred shares offering cost -- -- -- -- -- --
------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets applicable
to Common shares from capital
share transactions 207,189 -- 338,627 53,134 38,176 106,665
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
applicable to Common shares 1,068,818 6,165,286 1,236,919 11,656,258 1,181,604 5,189,554
Net assets applicable to Common
shares at the
beginning of period 103,067,825 96,902,539 189,633,011 177,976,753 82,067,233 76,877,679
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common
shares at the end of period $104,136,643 $103,067,825 $190,869,930 $189,633,011 $83,248,837 $82,067,233
====================================================================================================================================
Undistributed (Over-distribution of)
net investment income at
the end of period $ 1,830,679 $ 324,927 $ 1,761,555 $ 544,540 $ 830,638 $ 304,995
====================================================================================================================================
See accompanying notes to financial statements.
49
Statement of
Changes in Net Assets (continued)
INSURED
CALIFORNIA CALIFORNIA
DIVIDEND DIVIDEND
CALIFORNIA CALIFORNIA ADVANTAGE 3 ADVANTAGE
DIVIDEND ADVANTAGE (NAC) DIVIDEND ADVANTAGE 2 (NVX) (NZH) (NKL)
----------------------------- ------------------------------- --------------- ---------------
FOR THE FOR THE FOR THE
PERIOD 3/27/01 PERIOD 9/25/01 PERIOD 3/27/02
(COMMENCEMENT (COMMENCEMENT (COMMENCEMENT
YEAR ENDED YEAR ENDED YEAR ENDED OF OPERATIONS) OF OPERATIONS) OF OPERATIONS)
8/31/02 8/31/01 8/31/02 THROUGH 8/31/01 THROUGH 8/31/02 THROUGH 8/31/02
------------------------------------------------------------------------------------------------------------------------------------
OPERATIONS
Net investment income $ 24,981,916 $ 24,993,570 $ 15,663,509 $ 5,021,117 $ 20,039,962 $ 5,170,454
Net realized gain (loss)
from investments 3,991,908 153,449 351,147 (604,937) (6,468,859) 486,634
Change in net unrealized
appreciation (depreciation)
of investments (3,853,349) 30,026,536 (6,268,122) 13,963,695 8,660,828 13,672,712
Distributions to Preferred
Shareholders from and
in excess of net
investment income (2,424,510) (5,398,060) (1,578,722) (765,421) (1,962,036) (406,088)
------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets
applicable to Common
shares from operations 22,695,965 49,775,495 8,167,812 17,614,454 20,269,895 18,923,712
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS
From and in excess of net
investment income (20,156,545) (18,957,806) (12,867,313) (4,258,658) (17,358,987) (4,638,508)
------------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Common shares:
Net proceeds from sale of shares -- -- -- 211,280,100 344,509,500 217,998,750
Net proceeds from shares issued
to shareholders due to
reinvestment of distributions 84,644 53,132 73,486 227 79,128 41,170
Preferred shares offering costs -- -- -- (1,296,000) (2,129,850) (1,363,188)
------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets applicable
to Common shares from capital
share transactions 84,644 53,132 73,486 209,984,327 342,458,778 216,676,732
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in
net assets applicable
to Common shares 2,624,064 30,870,821 (4,626,015) 223,340,123 345,369,686 230,961,936
Net assets applicable to
Common shares at the
beginning of period 354,197,070 323,326,249 223,440,398 100,275 100,275 100,275
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common
shares at the end of period $356,821,134 $354,197,070 $218,814,383 $223,440,398 $345,469,961 $231,062,211
====================================================================================================================================
Undistributed (Over-distribution of)
net investment income at
the end of period $ 2,840,186 $ 439,325 $ 1,221,035 $ (2,962) $ 718,939 $ 125,858
====================================================================================================================================
See accompanying notes to financial statements.
50
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), Nuveen
California Dividend Advantage Municipal Fund 2 (NVX), Nuveen California Dividend
Advantage Municipal Fund 3 (NZH) and Nuveen Insured California Dividend
Advantage Municipal Fund (NKL). 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),
California Dividend Advantage 2 (NVX), California Dividend Advantage 3 (NZH) and
Insured California Dividend Advantage (NKL) are traded on the American Stock
Exchange.
Prior to the commencement of operations of California Dividend Advantage 2
(NVX), California Dividend Advantage 3 (NZH) and Insured California Dividend
Advantage (NKL), the Funds 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 organization expenses ($15,000, $11,500 and
$11,500, respectively) 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, 2002, California Dividend Advantage 3 (NZH) and Insured California
Dividend Advantage (NKL) had outstanding when-issued purchase commitments of
$7,007,194 and $4,244,880, respectively. There were no such outstanding purchase
commitments in any of the other Funds.
Investment Income
Interest income, which includes the amortization of premiums and accretion of
discounts for financial reporting purposes, is recorded on an accrual basis.
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 period ended August 31, 2002, have been designated Exempt Interest
Dividends.
51
Notes to
Financial Statements (continued)
Dividends and Distributions to Common Shareholders
Tax-exempt net investment income is declared monthly as a dividend. Generally,
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, if any, are distributed to shareholders not less
frequently than annually. Furthermore, capital gains are distributed only to the
extent they exceed available capital loss carryforwards.
Distributions to Common 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
on each Series may change every seven days, as set pursuant to a dutch auction
process by the auction agent, and is payable at or near the end of each rate
period. The number of shares outstanding, by Series and in total, for each Fund
is as follows:
INSURED INSURED
CALIFORNIA CALIFORNIA CALIFORNIA
PREMIUM PREMIUM PREMIUM
INCOME INCOME 2 INCOME
(NPC) (NCL) (NCU)
--------------------------------------------------------------------------------
Number of shares:
Series M -- -- 1,720
Series T 1,800 1,900 --
Series TH -- 1,900 --
Series F -- -- --
--------------------------------------------------------------------------------
Total 1,800 3,800 1,720
================================================================================
INSURED
CALIFORNIA CALIFORNIA CALIFORNIA CALIFORNIA
DIVIDEND DIVIDEND DIVIDEND DIVIDEND
ADVANTAGE ADVANTAGE 2 ADVANTAGE 3 ADVANTAGE
(NAC) (NVX) (NZH) (NKL)
--------------------------------------------------------------------------------
Number of shares:
Series M -- 2,200 3,740 --
Series T -- -- -- 2,360
Series TH 3,500 -- 3,740 --
Series F 3,500 2,200 -- 2,360
--------------------------------------------------------------------------------
Total 7,000 4,400 7,480 4,720
================================================================================
Effective November 16, 2001, California Dividend Advantage 3 (NZH) issued 3,740
Series M and 3,740 Series TH, $25,000 stated value Preferred shares.
Effective May 17, 2002, Insured California Dividend Advantage (NKL) issued 2,360
Series T and 2,360 Series F, $25,000 stated value Preferred shares.
52
Insurance
Insured California Premium Income (NPC), Insured California Premium Income 2
(NCL) and Insured California Dividend Advantage (NKL) 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 period ended August 31, 2002.
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.
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 3 (NZH) and Insured California Dividend
Advantage (NKL). California Dividend Advantage 2's (NVX), California Dividend
Advantage 3's (NZH) and Insured California Dividend Advantage's (NKL) share of
offering costs ($423,743, $723,000 and $457,500, respectively) were recorded as
a reduction of the proceeds from the sale of Common shares.
Costs incurred by California Dividend Advantage 2 (NVX), California Dividend
Advantage 3 (NZH) and Insured California Dividend Advantage (NKL) in connection
with their offering of Preferred shares ($1,296,000, $2,129,850 and $1,363,188,
respectively) were recorded as a reduction to paid-in surplus.
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 applicable to Common shares from operations during the
reporting period. Actual results may differ from those estimates.
Change in Accounting Policy
As required, effective September 1, 2001, the following Funds have adopted the
provisions of the new AICPA Audit and Accounting Guide for Investment Companies
and began accreting taxable market discount on debt securities. Prior to
September 1, 2001, the Funds did not accrete taxable market discount on debt
securities until they were sold. The cumulative effect of this accounting change
had no impact on the total net assets applicable to Common shares or the Common
share net asset values of the Funds, but resulted in an increase in the cost of
securities and a corresponding decrease in net unrealized appreciation based on
securities held by the Funds on September 1, 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)
--------------------------------------------------------------------------------
$893,472 $87,380 $102,039 $-- $6,523
================================================================================
The Statement of Changes in Net Assets and Financial Highlights for the prior
periods have not been restated to reflect this change in presentation.
The net effect of this change for the fiscal year ended August 31, 2002, was to
increase investment income with a corresponding decrease in net unrealized
appreciation 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)
--------------------------------------------------------------------------------
$99,557 $12,216 $13,593 $-- $16,009
================================================================================
53
Notes to
Financial Statements (continued)
Classification and Measurement of Redeemable Securities
The Funds have adopted the classification requirement of EITF D-98,
Classification and Measurement of Redeemable Securities. EITF D-98 requires that
Preferred shares, at liquidation value, be presented separately in the Statement
of Assets and Liabilities. Accordingly, certain reclassifications have been made
to the financial statements and financial highlights for all prior periods
presented. The adoption of EITF D-98 had no impact on the Funds' Common share
net asset values.
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
8/31/02 8/31/01 8/31/02 8/31/01 8/31/02 8/31/01
----------------------------------------------------------------------------------------------------------
Common shares:
Shares sold -- -- -- -- -- --
Shares issued to shareholders
due to reinvestment
of distributions 13,079 -- 22,774 3,745 2,696 7,867
----------------------------------------------------------------------------------------------------------
13,079 -- 22,774 3,745 2,696 7,867
==========================================================================================================
Preferred shares sold -- -- -- -- -- --
==========================================================================================================
CALIFORNIA DIVIDEND CALIFORNIA DIVIDEND CALIFORNIA DIVIDEND
ADVANTAGE (NAC) ADVANTAGE 2 (NVX) ADVANTAGE 3 (NZH)
----------------------- ------------------------- ---------------------
FOR THE FOR THE
PERIOD 3/27/01 PERIOD 9/25/01
(COMMENCEMENT (COMMENCEMENT
OF OPERATIONS) OF OPERATIONS)
YEAR ENDED YEAR ENDED YEAR ENDED THROUGH THROUGH
8/31/02 8/31/01 8/31/02 8/31/01 8/31/02
----------------------------------------------------------------------------------------------------------
Common shares:
Shares sold -- -- -- 14,780,000 24,100,000
Shares issued to shareholders
due to reinvestment
of distributions 5,665 3,990 3,644 16 5,833
----------------------------------------------------------------------------------------------------------
5,665 3,990 3,644 14,780,016 24,105,833
==========================================================================================================
Preferred shares sold -- -- -- 4,400 7,480
==========================================================================================================
INSURED
ADVANTAGE (NKL)
--------------------------
FOR THE
PERIOD 3/27/02
(COMMENCEMENT
OF OPERATIONS)
THROUGH
8/31/02
----------------------------------------------------------------------------------------------------------
Common shares:
Shares sold 15,250,000
Shares issued to shareholders
due to reinvestment
of distributions 2,759
----------------------------------------------------------------------------------------------------------
15,252,759
==========================================================================================================
Preferred shares sold 4,720
==========================================================================================================
54
3. SUBSEQUENT EVENT - DISTRIBUTIONS TO COMMON SHAREHOLDERS
The Funds declared Common share dividend distributions from their tax-exempt net
investment income which were paid October 1, 2002, to shareholders of record on
September 15, 2002, as follows:
INSURED INSURED
CALIFORNIA CALIFORNIA CALIFORNIA
PREMIUM PREMIUM PREMIUM
INCOME INCOME 2 INCOME
(NPC) (NCL) (NCU)
--------------------------------------------------------------------------------
Dividend per share $.0735 $.0725 $.0715
================================================================================
INSURED
CALIFORNIA CALIFORNIA CALIFORNIA CALIFORNIA
DIVIDEND DIVIDEND DIVIDEND DIVIDEND
ADVANTAGE ADVANTAGE 2 ADVANTAGE 3 ADVANTAGE
(NAC) (NVX) (NZH) (NKL)
--------------------------------------------------------------------------------
Dividend per share $.0755 $.0740 $.0720 $.0760
================================================================================
4. SECURITIES TRANSACTIONS
Purchases and sales (including maturities) of investments in long-term municipal
securities and short-term securities during the fiscal year ended August 31,
2002, were as follows:
INSURED INSURED
CALIFORNIA CALIFORNIA CALIFORNIA
PREMIUM PREMIUM PREMIUM
INCOME INCOME 2 INCOME
(NPC) (NCL) (NCU)
--------------------------------------------------------------------------------
Purchases:
Long-term municipal securities $43,979,020 $20,086,665 $12,537,322
Short-term securities 5,000,000 2,100,000 5,130,000
Sales and maturities:
Long-term municipal securities 43,680,995 18,076,382 11,922,585
Short-term securities -- 2,100,000 3,630,000
================================================================================
INSURED
CALIFORNIA CALIFORNIA CALIFORNIA CALIFORNIA
DIVIDEND DIVIDEND DIVIDEND DIVIDEND
ADVANTAGE ADVANTAGE 2 ADVANTAGE 3 ADVANTAGE
(NAC) (NVX) (NZH)* (NKL)**
---------------------------------------------------------------------------------------------------------
Purchases:
Long-term municipal securities $175,190,791 $102,810,054 $735,054,004 $363,571,078
Short-term securities 5,000,000 16,500,000 74,840,000 77,555,000
Sales and maturities:
Long-term municipal securities 172,874,646 110,750,382 225,300,412 29,389,628
Short-term securities 5,100,000 7,000,000 66,840,000 77,555,000
=========================================================================================================
* For the period September 25, 2001 (commencement of operations) through
August 31, 2002.
** For the period March 27, 2002 (commencement of operations) through August
31, 2002.
55
Notes to
Financial Statements (continued)
5. INCOME TAX INFORMATION
The following information is presented on an income tax basis as of August 31,
2002. Differences between amounts for financial statement and federal income tax
purposes are primarily due to timing differences in recognizing income on
taxable market discount securities and timing differences in recognizing certain
gains and losses on security transactions.
INSURED INSURED
CALIFORNIA CALIFORNIA CALIFORNIA
PREMIUM PREMIUM PREMIUM
INCOME INCOME 2 INCOME
(NPC) (NCL) (NCU)
--------------------------------------------------------------------------------
Cost of Investments $138,529,134 $261,195,722 $119,553,077
================================================================================
INSURED
CALIFORNIA CALIFORNIA CALIFORNIA CALIFORNIA
DIVIDEND DIVIDEND DIVIDEND DIVIDEND
ADVANTAGE ADVANTAGE 2 ADVANTAGE 3 ADVANTAGE
(NAC) (NVX) (NZH) (NKL)
--------------------------------------------------------------------------------
Cost of Investments $500,216,112 $317,126,975 $511,339,552 $334,707,539
================================================================================
INSURED INSURED
CALIFORNIA CALIFORNIA CALIFORNIA
PREMIUM PREMIUM PREMIUM
INCOME INCOME 2 INCOME
(NPC) (NCL) (NCU)
-------------------------------------------------------------------------------
Gross unrealized:
appreciation $13,266,953 $22,283,644 $6,755,807
depreciation -- -- (387,361)
-------------------------------------------------------------------------------
Net unrealized appreciation
on investments $13,266,953 $22,283,644 $6,368,446
===============================================================================
INSURED
CALIFORNIA CALIFORNIA CALIFORNIA CALIFORNIA
DIVIDEND DIVIDEND DIVIDEND DIVIDEND
ADVANTAGE ADVANTAGE 2 ADVANTAGE 3 ADVANTAGE
(NAC) (NVX) (NZH) (NKL)
--------------------------------------------------------------------------------------------
Gross unrealized:
appreciation $25,121,189 $12,223,277 $8,884,530 $13,672,712
depreciation (285,592) (4,511,695) (223,702) --
--------------------------------------------------------------------------------------------
Net unrealized appreciation
on investments $24,835,597 $ 7,711,582 $8,660,828 $13,672,712
============================================================================================
56
The tax components of undistributed net investment income and net realized gains
at August 31, 2002, were as follows:
INSURED INSURED
CALIFORNIA CALIFORNIA CALIFORNIA
PREMIUM PREMIUM PREMIUM
INCOME INCOME 2 INCOME
(NPC) (NCL) (NCU)
---------------------------------------------------------------------------------------------------------
Undistributed tax-exempt income $1,393,182 $2,577,506 $1,006,594
Undistributed ordinary income * 459,740 -- 40,993
Undistributed net long-term capital gains 334,001 -- --
=========================================================================================================
INSURED
CALIFORNIA CALIFORNIA CALIFORNIA CALIFORNIA
DIVIDEND DIVIDEND DIVIDEND DIVIDEND
ADVANTAGE ADVANTAGE 2 ADVANTAGE 3 ADVANTAGE
(NAC) (NVX) (NZH) (NKL)
---------------------------------------------------------------------------------------------------------
Undistributed tax-exempt income $4,585,890 $2,298,682 $2,477,722 $1,304,269
Undistributed ordinary income * -- -- -- 486,634
Undistributed net long-term capital gains -- -- -- --
=========================================================================================================
The tax character of distributions paid during the period ended August 31, 2002,
were designated for purposes of the dividends paid deduction as follows:
INSURED INSURED
CALIFORNIA CALIFORNIA CALIFORNIA
PREMIUM PREMIUM PREMIUM
INCOME INCOME 2 INCOME
(NPC) (NCL) (NCU)
---------------------------------------------------------------------------------------------------------
Distributions from tax-exempt income $6,096,991 $11,644,088 $5,280,680
Distributions from ordinary income * -- -- --
Distributions from net long-term capital gains -- -- --
=========================================================================================================
INSURED
CALIFORNIA CALIFORNIA CALIFORNIA CALIFORNIA
DIVIDEND DIVIDEND DIVIDEND DIVIDEND
ADVANTAGE ADVANTAGE 2 ADVANTAGE 3 ADVANTAGE
(NAC) (NVX) (NZH) (NKL)
---------------------------------------------------------------------------------------------------------
Distributions from tax-exempt income $22,478,680 $14,436,589 $17,562,240 $3,866,185
Distributions from ordinary income * -- -- -- --
Distributions from net long-term capital gains -- -- -- --
=========================================================================================================
* Ordinary income consists of taxable market discount income and net
short-term capital gains, if any.
At August 31, 2002, 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
CALIFORNIA CALIFORNIA CALIFORNIA CALIFORNIA
PREMIUM PREMIUM DIVIDEND DIVIDEND
INCOME 2 INCOME ADVANTAGE ADVANTAGE 2
(NCL) (NCU) (NAC) (NVX)
--------------------------------------------------------------------------------
Expiration year:
2003 $ 323,810 $ 329,551 $ -- $ --
2004 4,345,091 2,742,449 -- --
2005 1,283,948 1,049,994 -- --
2006 -- -- -- --
2007 -- -- -- --
2008 -- -- -- --
2009 2,185,870 -- 3,589,485 --
2010 440,509 -- -- 253,790
--------------------------------------------------------------------------------
Total $8,579,228 $4,121,994 $3,589,485 $253,790
================================================================================
57
Notes to
Financial Statements (continued)
California Dividend Advantage 3 (NZH) has elected to defer net realized losses
from investments incurred from November 1, 2001 through August 31, 2002
("post-October losses") in accordance with Federal income tax regulations. The
post-October losses of $6,468,859 are treated as having arisen in the following
year.
6. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under Insured California Premium Income's (NPC), Insured California Premium
Income 2's (NCL) and California Premium Income's (NCU) 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 (including net assets attributable to Preferred shares) of each Fund
as follows:
AVERAGE DAILY NET ASSETS (INCLUDING NET ASSETS
ATTRIBUTABLE TO PREFERRED SHARES) MANAGEMENT FEE
--------------------------------------------------------------------------------
For the first $125 million .6500%
For the next $125 million .6375
For the next $250 million .6250
For the next $500 million .6125
For the next $1 billion .6000
For the next $3 billion .5875
For net assets over $5 billion .5750
================================================================================
Under California Dividend Advantage's (NAC), California Dividend Advantage 2's
(NVX), California Dividend Advantage 3's (NZH) and Insured California Dividend
Advantage's (NKL) 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 (including net assets
attributable to Preferred shares) of each Fund as follows:
AVERAGE DAILY NET ASSETS (INCLUDING NET ASSETS
ATTRIBUTABLE TO PREFERRED SHARES) MANAGEMENT FEE
--------------------------------------------------------------------------------
For the first $125 million .6500%
For the next $125 million .6375
For the next $250 million .6250
For the next $500 million .6125
For the next $1 billion .6000
For net assets over $2 billion .5750
================================================================================
For the first ten years of California Dividend Advantage's (NAC) operations, the
Adviser has agreed to reimburse the Fund, as a percentage of average daily net
assets (including net assets attributable to Preferred shares), for fees and
expenses in the amounts, and for the time periods set forth below:
YEAR ENDING YEAR ENDING
JULY 31, JULY 31,
--------------------------------------------------------------------------------
1999* .30% 2005 .25%
2000 .30 2006 .20
2001 .30 2007 .15
2002 .30 2008 .10
2003 .30 2009 .05
2004 .30
================================================================================
* From the commencement of operations.
The Adviser has not agreed to reimburse California Dividend Advantage (NAC) for
any portion of its fees and expenses beyond July 31, 2009.
58
For the first ten years of California Dividend Advantage 2's (NVX) operations,
the Adviser has agreed to reimburse the Fund, as a percentage of average daily
net assets (including net assets attributable to Preferred shares), for fees and
expenses in the amounts, and for the time periods set forth below:
YEAR ENDING YEAR ENDING
MARCH 31, MARCH 31,
--------------------------------------------------------------------------------
2001* .30% 2007 .25%
2002 .30 2008 .20
2003 .30 2009 .15
2004 .30 2010 .10
2005 .30 2011 .05
2006 .30
================================================================================
* From the commencement of operations.
The Adviser has not agreed to reimburse California Dividend Advantage 2 (NVX)
for any portion of its fees and expenses beyond March 31, 2011.
For the first ten years of California Dividend Advantage 3's (NZH) operations,
the Adviser has agreed to reimburse the Fund, as a percentage of average daily
net assets (including net assets attributable to Preferred shares), for fees and
expenses in the amounts, and for the time periods set forth below:
YEAR ENDING YEAR ENDING
SEPTEMBER 30, SEPTEMBER 30,
--------------------------------------------------------------------------------
2001* .30% 2007 .25%
2002 .30 2008 .20
2003 .30 2009 .15
2004 .30 2010 .10
2005 .30 2011 .05
2006 .30
================================================================================
* From the commencement of operations.
The Adviser has not agreed to reimburse California Dividend Advantage 3 (NZH)
for any portion of its fees and expenses beyond September 30, 2011.
For the first ten years of Insured California Dividend Advantage's (NKL)
operations, the Adviser has agreed to reimburse the Fund, as a percentage of
average daily net assets (including net assets attributable to Preferred
shares), for fees and expenses in the amounts, and for the time periods set
forth below:
YEAR ENDING YEAR ENDING
MARCH 31, MARCH 31,
--------------------------------------------------------------------------------
2002* .30% 2008 .25%
2003 .30 2009 .20
2004 .30 2010 .15
2005 .30 2011 .10
2006 .30 2012 .05
2007 .30
================================================================================
* From the commencement of operations.
The Adviser has not agreed to reimburse Insured California Dividend Advantage
(NKL) for any portion of its fees and expenses beyond March 31, 2012.
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 Adviser or to their officers, all of whom receive remuneration for their
services to the Funds from the Adviser.
59
Financial
Highlights
Selected data for a Common share outstanding throughout each period:
Investment Operations Less Distributions
------------------------------------------------------- ------------------------------
Distributions
from and From and
in Excess Distributions in Excess
of Net from of Net
Beginning Net Investment Capital Investment Capital
Common Realized/ Income to Gains to Income to Gains to
Share Net Unrealized Preferred Preferred Common Common
Net Asset Investment Investment Share- Share- Share- Share-
Value Income Gain (Loss) holders+ holders+ Total holders holders Total
====================================================================================================================================
INSURED CALIFORNIA
PREMIUM INCOME (NPC)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 8/31:
2002(a) $16.04 $1.05 $ .03 $(.09) $-- $ .99 $(.86) $-- $(.86)
2001 15.08 1.04 .99 (.21) -- 1.82 (.86) -- (.86)
2000 14.81 1.09 .30 (.24) -- 1.15 (.88) -- (.88)
1999 16.31 1.09 (1.56) (.20) -- (.67) (.83) -- (.83)
1998 15.39 1.03 .92 (.22) -- 1.73 (.81) -- (.81)
INSURED CALIFORNIA
PREMIUM INCOME 2 (NCL)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 8/31:
2002(a) 15.01 1.02 (.02) (.10) -- .90 (.83) -- (.83)
2001 14.09 1.01 .91 (.22) -- 1.70 (.78) -- (.78)
2000 13.70 1.02 .41 (.24) -- 1.19 (.80) -- (.80)
1999 14.82 1.01 (1.14) (.21) -- (.34) (.78) -- (.78)
1998 14.06 .98 .77 (.24) -- 1.51 (.75) -- (.75)
CALIFORNIA PREMIUM
INCOME (NCU)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 8/31:
2002(a) 14.22 .99 .13 (.10) -- 1.02 (.82) -- (.82)
2001 13.34 1.00 .90 (.23) -- 1.67 (.79) -- (.79)
2000 13.19 1.03 .14 (.23) -- .94 (.79) -- (.79)
1999 14.30 1.00 (1.13) (.21) -- (.34) (.77) -- (.77)
1998 13.60 .98 .70 (.24) -- 1.44 (.74) -- (.74)
====================================================================================================================================
Total Returns
----------------------
Based
Offering on
Costs and Ending Common
Preferred Common Based Share
Share Share Ending on Net
Underwriting Net Asset Market Market Asset
Discounts Value Value Value** Value**
=========================================================================================
INSURED CALIFORNIA
PREMIUM INCOME (NPC)
-----------------------------------------------------------------------------------------
Year Ended 8/31:
2002(a) $-- $16.17 $15.8500 6.73% 6.47%
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
INSURED CALIFORNIA
PREMIUM INCOME 2 (NCL)
-----------------------------------------------------------------------------------------
Year Ended 8/31:
2002(a) -- 15.08 14.8000 5.57 6.29
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
CALIFORNIA PREMIUM
INCOME (NCU)
-----------------------------------------------------------------------------------------
Year Ended 8/31:
2002(a) -- 14.42 14.0000 4.84 7.48
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
=========================================================================================
Ratios/Supplemental Data
--------------------------------------------------------------------------
Before Credit/ After Credit/
Reimbursement Reimbursement***
------------------------ --------------------------
Ratio of Net Ratio of Net
Ratio of Investment Ratio of Investment
Ending Expenses Income to Expenses Income to
Net to Average Average to Average Average
Assets Net Assets Net Assets Net Assets Net Assets
Applicable Applicable Applicable Applicable Applicable Portfolio
to Common to Common to Common to Common to Common Turnover
Shares (000) Shares++ Shares++ Shares++ Shares++ Rate
======================================================================================================
INSURED CALIFORNIA
PREMIUM INCOME (NPC)
------------------------------------------------------------------------------------------------------
Year Ended 8/31:
2002(a) $104,137 1.21% 6.65% 1.19% 6.66% 30%
2001 103,068 1.22 6.77 1.21 6.79 21
2000 96,903 1.25 7.65 1.24 7.66 27
1999 95,091 1.22 6.81 1.22 6.82 50
1998 104,478 1.22 6.49 1.22 6.49 2
INSURED CALIFORNIA
PREMIUM INCOME 2 (NCL)
------------------------------------------------------------------------------------------------------
Year Ended 8/31:
2002(a) 190,870 1.23 6.83 1.22 6.84 6
2001 189,633 1.24 7.01 1.24 7.02 18
2000 177,977 1.28 7.65 1.26 7.66 26
1999 172,833 1.24 6.86 1.24 6.86 35
1998 186,399 1.25 6.79 1.25 6.79 13
CALIFORNIA PREMIUM
INCOME (NCU)
------------------------------------------------------------------------------------------------------
Year Ended 8/31:
2002(a) 83,249 1.27 7.07 1.26 7.08 10
2001 82,067 1.32 7.36 1.30 7.38 18
2000 76,878 1.38 8.09 1.36 8.10 19
1999 75,877 1.30 7.08 1.30 7.08 36
1998 82,066 1.32 7.02 1.32 7.02 21
======================================================================================================
Municipal Auction Rate Cumulative
Preferred Stock at End of Period
----------------------------------
Aggregate Liquidation
Amount and Market Asset
Outstanding Value Coverage
(000) Per Share Per Share
==============================================================
INSURED CALIFORNIA
PREMIUM INCOME (NPC)
--------------------------------------------------------------
Year Ended 8/31:
2002(a) $45,000 $25,000 $82,854
2001 45,000 25,000 82,260
2000 45,000 25,000 78,835
1999 45,000 25,000 77,828
1998 45,000 25,000 83,043
INSURED CALIFORNIA
PREMIUM INCOME 2 (NCL)
--------------------------------------------------------------
Year Ended 8/31:
2002(a) 95,000 25,000 75,229
2001 95,000 25,000 74,903
2000 95,000 25,000 71,836
1999 95,000 25,000 70,482
1998 95,000 25,000 74,052
CALIFORNIA PREMIUM
INCOME (NCU)
--------------------------------------------------------------
Year Ended 8/31:
2002(a) 43,000 25,000 73,400
2001 43,000 25,000 72,714
2000 43,000 25,000 69,696
1999 43,000 25,000 69,115
1998 43,000 25,000 72,713
==============================================================
* 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 Common Share Net Asset
Value is the combination of reinvested dividend income, reinvested capital
gains distributions, if any, and changes in Common Share 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) As required, effective September 1, 2001, the Funds have adopted the
provisions of the new AICPA Audit and Accounting Guide for Investment
Companies and began accreting taxable market discount on debt securities.
The effect of this change for the fiscal year ended August 31, 2002, was to
increase net investment income per share with a corresponding decrease in
net realized/unrealized investment gain (loss) per share and increase each
ratio of net investment income to average net assets applicable to Common
Shares as follows:
INSURED INSURED
CALIFORNIA CALIFORNIA CALIFORNIA
PREMIUM PREMIUM PREMIUM
INCOME INCOME 2 INCOME
(NPC) (NCL) (NCU)
-----------------------------------
2002 per share impact ($) .02 -- --
2002 income ratio impact (%) .10 .01 .02
The Financial Highlights for the prior periods have not been restated to reflect
this change in presentation.
See accompanying notes to financial statements.
60-61 spread
Financial Highlights (continued)
Selected data for a Common share outstanding throughout each period:
Investment Operations Less Distributions
------------------------------------------------------- ------------------------------
Distributions
from and From and
in Excess Distributions in Excess
of Net from of Net
Beginning Net Investment Capital Investment Capital
Common Realized/ Income to Gains to Income to Gains to
Share Net Unrealized Preferred Preferred Common Common
Net Asset Investment Investment Share- Share- Share- Share-
Value Income Gain (Loss) holders+ holders+ Total holders holders Total
====================================================================================================================================
CALIFORNIA DIVIDEND
ADVANTAGE (NAC)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 8/31:
2002(e) $15.13 $1.07 $ -- $(.10) $-- $ .97 $(.86) $-- $(.86)
2001 13.82 1.07 1.28 (.23) -- 2.12 (.81) -- (.81)
2000 13.33 1.07 .52 (.26) -- 1.33 (.84) -- (.84)
1999(a) 14.33 .20 (.92) (.03) -- (.75) (.14) -- (.14)
CALIFORNIA DIVIDEND
ADVANTAGE 2 (NVX)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 8/31:
2002(e) 15.11 1.06 (.40) (.11) -- .55 (.87) -- (.87)
2001(b) 14.33 .34 .90 (.05) -- 1.19 (.29) -- (.29)
CALIFORNIA DIVIDEND
ADVANTAGE 3 (NZH)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 8/31:
2002(c) 14.33 .83 .09 (.08) -- .84 (.72) -- (.72)
INSURED CALIFORNIA
DIVIDEND ADVANTAGE (NKL)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 8/31:
2002(d) 14.33 .34 .92 (.03) -- 1.23 (.30) -- (.30)
====================================================================================================================================
Total Returns
---------------------
Based
Offering on
Costs and Ending Common
Preferred Common Based Share
Share Share Ending on Net
Underwriting Net Asset Market Market Asset
Discounts Value Value Value** Value**
========================================================================================
CALIFORNIA DIVIDEND
ADVANTAGE (NAC)
----------------------------------------------------------------------------------------
Year Ended 8/31:
2002(e) $-- $15.24 $14.5500 3.67% 6.75%
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:
2002(e) -- 14.79 14.2800 (.27) 3.90
2001(b) (.12) 15.11 15.2100 3.40 7.55
CALIFORNIA DIVIDEND
ADVANTAGE 3 (NZH)
----------------------------------------------------------------------------------------
Year Ended 8/31:
2002(c) (.12) 14.33 14.0000 (1.68) 5.32
INSURED CALIFORNIA
DIVIDEND ADVANTAGE (NKL)
----------------------------------------------------------------------------------------
Year Ended 8/31:
2002(d) (.12) 15.14 15.0000 2.05 7.84
========================================================================================
Ratios/Supplemental Data
--------------------------------------------------------------------------
Before Credit/ After Credit/
Reimbursement Reimbursement***
------------------------ --------------------------
Ratio of Net Ratio of Net
Ratio of Investment Ratio of Investment
Ending Expenses Income to Expenses Income to
Net to Average Average to Average Average
Assets Net Assets Net Assets Net Assets Net Assets
Applicable Applicable Applicable Applicable Applicable Portfolio
to Common to Common to Common to Common to Common Turnover
Shares (000) Shares++ Shares++ Shares++ Shares++ Rate
======================================================================================================
CALIFORNIA DIVIDEND
ADVANTAGE (NAC)
------------------------------------------------------------------------------------------------------
Year Ended 8/31:
2002(e) $356,821 1.18% 6.76% .72% 7.22% 33%
2001 354,197 1.19 7.03 .72 7.50 17
2000 323,326 1.24 7.93 .75 8.43 25
1999(a) 311,367 .93* 5.06* .55* 5.45* 8
CALIFORNIA DIVIDEND
ADVANTAGE 2 (NVX)
------------------------------------------------------------------------------------------------------
Year Ended 8/31:
2002(e) 218,814 1.19 6.82 .73 7.28 32
2001(b) 223,440 1.05* 5.23* .62* 5.65* 40
CALIFORNIA DIVIDEND
ADVANTAGE 3 (NZH)
------------------------------------------------------------------------------------------------------
Year Ended 8/31:
2002(c) 345,470 1.15* 6.01* .69* 6.47* 49
INSURED CALIFORNIA
DIVIDEND ADVANTAGE (NKL)
------------------------------------------------------------------------------------------------------
Year Ended 8/31:
2002(d) 231,062 1.10* 4.98* .60* 5.47* 12
======================================================================================================
Municipal Auction Rate Cumulative
Preferred Stock at End of Period
----------------------------------
Aggregate Liquidation
Amount and Market Asset
Outstanding Value Coverage
(000) Per Share Per Share
===============================================================
CALIFORNIA DIVIDEND
ADVANTAGE (NAC)
---------------------------------------------------------------
Year Ended 8/31:
2002(e) $175,000 $25,000 $75,974
2001 175,000 25,000 75,600
2000 175,000 25,000 71,189
1999(a) 175,000 25,000 69,481
CALIFORNIA DIVIDEND
ADVANTAGE 2 (NVX)
---------------------------------------------------------------
Year Ended 8/31:
2002(e) 110,000 25,000 74,731
2001(b) 110,000 25,000 75,782
CALIFORNIA DIVIDEND
ADVANTAGE 3 (NZH)
---------------------------------------------------------------
Year Ended 8/31:
2002(c) 187,000 25,000 71,186
INSURED CALIFORNIA
DIVIDEND ADVANTAGE (NKL)
---------------------------------------------------------------
Year Ended 8/31:
2002(d) 118,000 25,000 73,954
===============================================================
* 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 Common Share Net Asset
Value is the combination of reinvested dividend income, reinvested capital
gains distributions, if any, and changes in Common Share 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.
(c) For the period September 25, 2001 (commencement of operations) through
August 31, 2002.
(d) For the period March 27, 2002 (commencement of operations) through August
31, 2002.
(e) As required, effective September 1, 2001, the Funds have adopted the
provisions of the new AICPA Audit and Accounting Guide for Investment
Companies and began accreting taxable market discount on debt securities.
The effect of this change for the fiscal year ended August 31, 2002, was to
increase net investment income per share with a corresponding decrease in
net realized/unrealized investment gain (loss) per share and increase each
ratio of net investment income to average net assets applicable to Common
Shares as follows:
CALIFORNIA CALIFORNIA
DIVIDEND DIVIDEND
ADVANTAGE ADVANTAGE 2
(NAC) (NVX)
------------------------
2002 per share impact ($) -- --
2002 income ratio impact (%) -- .01
The Financial Highlights for the prior periods have not been restated to reflect
this change in presentation.
See accompanying notes to financial statements.
62-63 spread
Directors/Trustees
and Officers
The management of the Funds, including general supervision of the duties
performed for the Funds under the Management Agreement, is the responsibility of
the Board of Directors/Trustees of the Funds. The number of directors/trustees
of the Funds is currently set at seven, one of whom is an "interested person"
(as the term is defined in the Investment Company Act of 1940) and six of whom
are not interested persons. None of the directors/trustees who are not
interested persons of the Funds have ever been a director or employee of, or
consultant to, Nuveen or its affiliates. The names and business addresses of the
directors/trustees and officers of the Funds, their principal occupations and
other affiliations during the past five years, the number of portfolios each
oversees and other directorships they hold are set forth below.
YEAR FIRST
ELECTED OR NUMBER OF FUNDS
APPOINTED PRINCIPAL OCCUPATION(S) IN NUVEEN COMPLEX
NAME, BIRTHDATE POSITION(S) HELD AND TERM INCLUDING OTHER DIRECTORSHIPS OVERSEEN BY
AND ADDRESS WITH THE FUND OF OFFICE (a) DURING PAST 5 YEARS DIRECTOR/TRUSTEE
------------------------------------------------------------------------------------------------------------------------------------
DIRECTOR/TRUSTEE WHO IS AN INTERESTED PERSON OF THE FUNDS:
------------------------------------------------------------------------------------------------------------------------------------
TIMOTHY R. SCHWERTFEGER (1) Chairman of the 1994 Chairman and Director (since 1996) of The John 134
3/28/1949 Board, President Term: Nuveen Company, Nuveen Investments, Nuveen
333 W. Wacker Drive and Director/ one year (2) Advisory Corp. and Nuveen Institutional Advisory
Chicago, IL 60606 Trustee Corp.; Chairman and Director (since 1997) of
Nuveen Asset Management Inc.; Director (since
1996) of Institutional Capital Corporation;
Chairman and Director (since 1999) of Rittenhouse
Financial Services Inc.; Chief Executive Officer
(since 1999) of Nuveen Senior Loan Asset
Management Inc.
DIRECTORS/TRUSTEES WHO ARE NOT INTERESTED PERSONS OF THE FUNDS:
------------------------------------------------------------------------------------------------------------------------------------
ROBERT P. BREMNER Director/Trustee 1997 Private Investor and Management Consultant. 117
8/22/1940 Term:
333 W. Wacker Drive one year (2)
Chicago, IL 60606
------------------------------------------------------------------------------------------------------------------------------------
LAWRENCE H. BROWN Director/Trustee 1993 Retired (1989) as Senior Vice President of The 117
7/29/1934 Term: Northern Trust Company.
333 W. Wacker Drive one year (2)
Chicago, IL 60606
------------------------------------------------------------------------------------------------------------------------------------
ANNE E. IMPELLIZZERI Director/Trustee 1994 Retired (2002); formerly, Executive Director 117
1/26/1933 Term: (since 1998) of Manitoga (Center for Russel
333 W. Wacker Drive one year (2) Wright's Design with Nature); prior thereto,
Chicago, IL 60606 President and Chief Executive Officer of
Blanton-Peale Institutes of Religion and Health;
prior thereto, Vice President, Metropolitan Life
Insurance Co.
------------------------------------------------------------------------------------------------------------------------------------
PETER R. SAWERS Director/Trustee 1992 Adjunct Professor of Business and Economics, 117
4/3/1933 Term: University of Dubuque, Iowa; Director, Executive
333 W. Wacker Drive one year (2) Service Corps of Chicago (not-for-profit); Director,
Chicago, IL 60606 Hadley School for the Blind (not-for-profit);
formerly (1991-2000) Adjunct Professor, Lake Forest
Graduate School of Management, Lake Forest,
Illinois; prior thereto, Executive Director,
Towers Perrin Australia, a management consulting
firm; Chartered Financial Analyst; Certified
Management Consultant.
64
YEAR FIRST
ELECTED OR NUMBER OF FUNDS
APPOINTED PRINCIPAL OCCUPATION(S) IN NUVEEN COMPLEX
NAME, BIRTHDATE POSITION(S) HELD AND TERM INCLUDING OTHER DIRECTORSHIPS OVERSEEN BY
AND ADDRESS WITH THE FUND OF OFFICE (a) DURING PAST 5 YEARS DIRECTOR/TRUSTEE
------------------------------------------------------------------------------------------------------------------------------------
DIRECTORS/TRUSTEES WHO ARE NOT INTERESTED PERSONS OF THE FUNDS (CONTINUED):
------------------------------------------------------------------------------------------------------------------------------------
WILLIAM J. SCHNEIDER Director/Trustee 1997 Senior Partner and Chief Operating Officer, 117
9/24/1944 Term: Miller-Valentine Group, Vice President,
333 W. Wacker Drive one year (2) Miller-Valentine Realty, a construction company;
Chicago, IL 60606 Chair, Miami Valley Hospital; Vice Chair, Dayton
Development Coalition; formerly, Member,
Community Advisory Board, National City Bank,
Dayton, Ohio; and Business Advisory Council,
Cleveland Federal Reserve Bank.
------------------------------------------------------------------------------------------------------------------------------------
JUDITH M. STOCKDALE Director/Trustee 1997 Executive Director, Gaylord and Dorothy 117
12/29/1947 Term: Donnelley Foundation (since 1994); prior
333 W. Wacker Drive one year (2) thereto, Executive Director, Great Lakes
Chicago, IL 60606 Protection Fund (from 1990 to 1994).
NUMBER OF FUNDS
YEAR FIRST PRINCIPAL OCCUPATION(S) IN NUVEEN COMPLEX
NAME, BIRTHDATE POSITION(S) HELD ELECTED OR INCLUDING OTHER DIRECTORSHIPS OVERSEEN BY
AND ADDRESS WITH THE FUND APPOINTED (b) DURING PAST 5 YEARS OFFICER
------------------------------------------------------------------------------------------------------------------------------------
OFFICERS OF THE FUNDS:
------------------------------------------------------------------------------------------------------------------------------------
MICHAEL T. ATKINSON Vice President 2002 Vice President (since January 2002), formerly, 134
2/3/1966 Assistant Vice President (since 2000), previously,
333 W. Wacker Drive Associate of Nuveen Investments.
Chicago, IL 60606
------------------------------------------------------------------------------------------------------------------------------------
PAUL L. BRENNAN Vice President 2002 Vice President (since January 2002), formerly, 129
11/10/1966 Assistant Vice President of Nuveen
333 W. Wacker Drive Advisory Corp.
Chicago, IL 60606
------------------------------------------------------------------------------------------------------------------------------------
PETER H. D'ARRIGO Vice President and 1999 Vice President of Nuveen Investments (since 134
11/28/1967 Treasurer 1999), prior thereto, Assistant Vice President
333 W. Wacker Drive (from 1997); Vice President and Treasurer (since
Chicago, IL 60606 1999) of Nuveen Senior Loan Asset Management
Inc.; Chartered Financial Analyst.
------------------------------------------------------------------------------------------------------------------------------------
SUSAN M. DESANTO Vice President 2001 Vice President of Nuveen Advisory Corp. (since 134
9/8/1954 2001); previously, Vice President of Van Kampen
333 W. Wacker Drive Investment Advisory Corp. (since 1998); prior
Chicago, IL 60606 thereto, Assistant Vice President of Van Kampen
Investment Advisory Corp.
----------------------------------------------------------------------------------------------------------------------------------
JESSICA R. DROEGER Vice President 2002 Vice President (since January 2002), Assistant 134
9/24/1964 General Counsel and Assistant Secretary (since
333 W. Wacker Drive 1998), formerly Assistant Vice President of Nuveen
Chicago, IL 60606 Investments; Vice President (since January 2002)
and Assistant Secretary (since 1998), formerly
Assistant Vice President of Nuveen Advisory Corp.
and Nuveen Institutional Advisory Corp.; prior
thereto, Associate at the law firm D'Ancona
Partners LLC.
65
Directors/Trustees
and Officers (continued)
NUMBER OF FUNDS
YEAR FIRST PRINCIPAL OCCUPATION(S) IN NUVEEN COMPLEX
NAME, BIRTHDATE POSITION(S) HELD ELECTED OR INCLUDING OTHER DIRECTORSHIPS OVERSEEN BY
AND ADDRESS WITH THE FUND APPOINTED (b) DURING PAST 5 YEARS OFFICER
------------------------------------------------------------------------------------------------------------------------------------
OFFICERS OF THE FUNDS (CONTINUED):
------------------------------------------------------------------------------------------------------------------------------------
LORNA C. FERGUSON Vice President 1998 Vice President of Nuveen Investments; Vice 134
10/24/1945 President (since 1998) of Nuveen Advisory Corp.
333 W. Wacker Drive and Nuveen Institutional Advisory Corp.
Chicago, IL 60606
------------------------------------------------------------------------------------------------------------------------------------
WILLIAM M. FITZGERALD Vice President 1995 Managing Director (since January 2002) of Nuveen 134
3/2/1964 Investments; Managing Director of Nuveen Advisory
333 W. Wacker Drive Corp. and Nuveen Institutional Advisory Corp. (since
Chicago, IL 60606 2001); prior thereto, Vice President of Nuveen
Advisory Corp.; Chartered Financial Analyst.
------------------------------------------------------------------------------------------------------------------------------------
STEPHEN D. FOY Vice President and 1998 Vice President of Nuveen Investments and 134
5/31/1954 Controller (since 1998) The John Nuveen Company; Vice
333 W. Wacker Drive President (since 1999) of Nuveen Senior Loan
Chicago, IL 60606 Asset Management Inc.; Certified Public
Accountant.
------------------------------------------------------------------------------------------------------------------------------------
J. THOMAS FUTRELL Vice President 1992 Vice President of Nuveen Advisory Corp.; 129
7/5/1955 Chartered Financial Analyst.
333 W. Wacker Drive
Chicago, IL 60606
------------------------------------------------------------------------------------------------------------------------------------
RICHARD A. HUBER Vice President 1997 Vice President of Nuveen Institutional Advisory 129
3/26/1963 Corp. (since 1998) and Nuveen Advisory Corp.
333 W. Wacker Drive
Chicago, IL 60606
------------------------------------------------------------------------------------------------------------------------------------
STEVEN J. KRUPA Vice President 1992 Vice President of Nuveen Advisory Corp. 129
8/21/1957
333 W. Wacker Drive
Chicago, IL 60606
------------------------------------------------------------------------------------------------------------------------------------
DAVID J. LAMB Vice President 2000 Vice President (since 2000) of Nuveen Investments, 134
3/22/1963 previously Assistant Vice President (since 1999);
333 W. Wacker Drive prior thereto, Associate of Nuveen Investments;
Chicago, IL 60606 Certified Public Accountant.
------------------------------------------------------------------------------------------------------------------------------------
TINA M. LAZAR Vice President 2002 Vice President (since 1999), previously, 134
8/27/1961 Assistant Vice President (since 1993) of
333 W. Wacker Drive Nuveen Investments.
Chicago, IL 60606
------------------------------------------------------------------------------------------------------------------------------------
LARRY W. MARTIN Vice President and 1992 Vice President, Assistant Secretary and 134
7/27/1951 Assistant Secretary Assistant General Counsel of Nuveen
333 W. Wacker Drive Investments; Vice President and Assistant
Chicago, IL 60606 Secretary of Nuveen Advisory Corp. and Nuveen
Institutional Advisory Corp.; Vice President and
Assistant Secretary of The John Nuveen
Company and Nuveen Asset Management, Inc.;
Vice President and Assistant Secretary (since 1999)
of Nuveen Senior Loan Asset Management Inc.
66
NUMBER OF FUNDS
YEAR FIRST PRINCIPAL OCCUPATION(S) IN NUVEEN COMPLEX
NAME, BIRTHDATE POSITION(S) HELD ELECTED OR INCLUDING OTHER DIRECTORSHIPS OVERSEEN BY
AND ADDRESS WITH THE FUND APPOINTED (b) DURING PAST 5 YEARS OFFICER
------------------------------------------------------------------------------------------------------------------------------------
OFFICERS OF THE FUNDS (CONTINUED):
------------------------------------------------------------------------------------------------------------------------------------
EDWARD F. NEILD, IV Vice President 1996 Managing Director (since January 2002) of Nuveen 134
7/7/1965 Investments; Managing Director (since 1997) of
333 W. Wacker Drive Nuveen Advisory Corp. and Nuveen Institutional
Chicago, IL 60606 Advisory Corp.; Chartered Financial Analyst.
------------------------------------------------------------------------------------------------------------------------------------
THOMAS J. O'SHAUGHNESSY Vice President 2002 Vice President (since January 2002), formerly, 129
9/4/1960 Assistant Vice President (since 1998) of Nuveen
333 W. Wacker Drive Advisory Corp.; prior thereto, Portfolio Manager.
Chicago, IL 60606
------------------------------------------------------------------------------------------------------------------------------------
THOMAS C. SPALDING Vice President 1992 Vice President of Nuveen Advisory Corp. and 129
7/31/1951 Nuveen Institutional Advisory Corp.; Chartered
333 W. Wacker Drive Financial Analyst.
Chicago, IL 60606
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GIFFORD R. ZIMMERMAN Vice President and 1992 Managing Director (since January 2002, formerly 134
9/9/1956 Secretary Vice President), Assistant Secretary and Associate
333 W. Wacker Drive General Counsel (formerly Assistant General Counsel)
Chicago, IL 60606 of Nuveen Investments; Managing Director (since
January 2002, formerly Vice President) and
Assistant Secretary of Nuveen Advisory Corp. and
Nuveen Institutional Advisory Corp.; Vice President
and Assistant Secretary of The John Nuveen
Company; Managing Director (since January 2002,
formerly Vice President) and Assistant Secretary
(since 1999) of Nuveen Senior Loan Asset
Management Inc.; Chartered Financial Analyst.
(a) Year First Elected or Appointed is the year presented or each Fund's
respective inception date if later.
(b) Year First Elected or Appointed is the year presented or each Fund's
respective inception date if later. Officers serve one year terms through
July of each year.
(1) Mr. Schwertfeger is an "interested person" of the Funds, as defined in the
Investment Company Act of 1940, because he is an officer and director of
Nuveen Advisory Corp.
(2) Directors/Trustees are elected each year by shareholders and serve a one
year term until his/her successor is elected.
67
Build Your Wealth
Automatically
Sidebar text: Nuveen makes reinvesting easy. A phone call is all it takes to set
up your reinvestment account.
NUVEEN CLOSED-END EXCHANGE-TRADED FUNDS DIVIDEND REINVESTMENT PLAN
Your Nuveen Closed-End 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.
68
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
State Street Bank & Trust
Boston, MA
TRANSFER AGENT AND SHAREHOLDER SERVICES
Nuveen Investments
P.O.Box 43071
Providence, RI 02940-3071
(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 period ended August 31, 2002. Any future repurchases
will be reported to shareholders in the next annual or semiannual report.
69
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.
Logo: NUVEEN Investments
Nuveen Investments o 333 West Wacker Drive
Chicago, IL 60606 o www.nuveen.com EAN-B-0802